## Facts

- Lorillard Tobacco Company owned registered trademarks for Newport cigarettes.
- A & E Oil, a gas-station/convenience store operator, sold cigarettes represented as Newport that Lorillard alleged were counterfeit.
- The packs displayed irregularities, including tax stamps described as obviously counterfeit.
- A & E purchased the cigarettes from “U.S.A. Cigarettes,” identified in the record as a known dealer of counterfeit cigarettes.
- During discovery, A & E represented it had produced all relevant business records but later produced additional checks to U.S.A. Cigarettes, supporting the inference that it concealed information about the source and scope of the sales.
- The district court granted summary judgment for Lorillard on infringement and awarded statutory damages and attorneys’ fees based on a finding of knowing, willful counterfeiting.
- On appeal, A & E did not dispute counterfeiting or infringement, challenging only the monetary awards.

## Issues

1. Whether the district court abused its discretion by finding willful use of a counterfeit mark and awarding substantial statutory damages under 15 U.S.C. § 1117(c).
2. Whether the district court abused its discretion by finding the case “exceptional” and awarding attorneys’ fees under 15 U.S.C. § 1117(a).

## Decision

- The Seventh Circuit affirmed.
- The court held the district court did not abuse its discretion in finding willful infringement based on suspicious sourcing, obvious indicia of counterfeiting, and evasive discovery conduct.
- The court upheld the statutory damages award as within the range authorized by § 1117(c) and supported by deterrence and concealment-related considerations.
- The court upheld the attorneys’ fee award, concluding the evidence of willful counterfeiting and litigation conduct supported an “exceptional case” determination under § 1117(a).

## Legal Principles

- In counterfeit-mark cases, a plaintiff may elect statutory damages under 15 U.S.C. § 1117(c) instead of proving actual damages and profits.
- Willfulness is not a prerequisite to statutory damages, but it supports higher statutory awards within the statutory range and supports an “exceptional case” finding for fee shifting.
- Willfulness may be inferred from deliberate indifference to clear warning signs of counterfeiting, including suspicious suppliers and obvious product irregularities.
- Statutory damages and attorneys’ fees determinations under § 1117 are reviewed for abuse of discretion; appellate review is highly deferential when the district court’s award is evidence-based and within statutory limits.
- “Exceptional cases” under § 1117(a) commonly include deliberate or willful infringement and may be supported by obstructive or misleading litigation conduct.

## Conclusion

The Seventh Circuit affirmed substantial statutory damages and attorneys’ fees where a retailer sold counterfeit trademarked goods under circumstances supporting a finding of willfulness, and where the district court’s chosen remedies were within the Lanham Act’s statutory framework and justified by deterrence and the defendants’ conduct.


Lorillard Tobacco Co. v. A & E Oil, Inc., 503 F.3d 588 (7th Cir. 2007)