## Facts

- George Basch Co., Inc. manufactured and sold NEVR-DULL, a cotton-wadding metal polish packaged in a distinctive five-ounce navy-blue cylindrical can with prominent white lettering and red-and-white icons.
- Blue Coral, Inc. and related entities made and sold automotive products under the ESPREE brand.
- In 1987, Blue Coral became Basch’s exclusive distributor of NEVR-DULL in Canada; the Canadian packaging was substantially similar to the U.S. version, with French-language changes.
- In 1988, Blue Coral asked Basch to produce a wadding metal polish to be sold in the United States under Blue Coral’s ESPREE line; negotiations failed over price.
- Blue Coral then developed its own wadding metal polish and marketed it in packaging Basch claimed was deceptively similar to NEVR-DULL’s trade dress.
- Basch sued under Lanham Act § 43(a) for trade dress infringement and sought, among other remedies, an accounting of Blue Coral’s profits.
- A jury found trade dress infringement and awarded damages that included Blue Coral’s profits; the district court entered judgment awarding profits and injunctive relief, concluding bad faith was not required for profits.
- Blue Coral appealed the profits award and aspects of the injunction; Basch cross-appealed on remedial issues.

## Issues

1. Whether, in a Lanham Act § 43(a) trade dress infringement action, a plaintiff may recover the defendant’s profits without proving willful deception or bad faith.
2. Whether the district court applied the correct legal standard in awarding Blue Coral’s profits.
3. Whether the terms of the injunction were properly tailored to prevent likely confusion without restraining lawful competition.

## Decision

- The Second Circuit held that willful deception (bad faith) is a necessary predicate to awarding a defendant’s profits for Lanham Act trade dress infringement.
- The court reversed the profits award because the district court treated bad faith as unnecessary.
- The court remanded for further proceedings under the proper standard.
- The court generally upheld injunctive relief but modified aspects of the injunction to ensure it was appropriately limited.

## Legal Principles

- An accounting of profits under 15 U.S.C. § 1117(a) for a § 43(a) trade dress violation is an equitable remedy, not an automatic consequence of liability.
- In the Second Circuit, a plaintiff seeking the defendant’s profits for trade dress infringement must prove the defendant acted with willful deception or bad faith.
- The equities underlying a profits award include preventing unjust enrichment and deterring intentional misconduct; absent willfulness, a profits award risks overcompensating the plaintiff and functioning as punishment.
- Injunctive relief remains available upon a showing of trade dress infringement and likely confusion, but its scope must be confined to the proven risk of confusion and cannot bar legitimate competition.

## Conclusion

The Second Circuit reversed the award of Blue Coral’s profits because the district court did not require proof of willful deception, holding that bad faith is a prerequisite to profits in Lanham Act trade dress cases, while sustaining and adjusting injunctive relief to fit the likelihood of confusion shown at trial.


George Basch Co. v. Blue Coral, Inc., 968 F.2d 1532 (2d Cir. 1992)