## Facts

- Stone Creek, Inc., an Arizona furniture retailer, used the STONE CREEK mark with a red oval logo in Arizona since the early 1990s, obtained an Arizona registration in 1992, and a federal registration in 2012.
- Omnia Italian Design, Inc., a California leather-furniture manufacturer, supplied Stone Creek with furniture bearing Stone Creek’s mark under a long-running manufacturing relationship that began in 2003.
- Without Stone Creek’s authorization, Omnia used the identical STONE CREEK mark on leather furniture sold to a Midwestern department-store chain (Bon-Ton).
- Stone Creek learned of Omnia’s sales in 2013 and sued for federal trademark infringement and related unfair-competition claims.
- After a bench trial, the district court entered judgment for Omnia, finding no likelihood of confusion and accepting Omnia’s Tea Rose–Rectanus theory as an alternative ground; it also imposed sanctions on Stone Creek’s counsel under 28 U.S.C. § 1927.
- Stone Creek appealed.

## Issues

1. Whether use of an identical mark on identical goods in partially overlapping marketing channels created a likelihood of consumer confusion under the Lanham Act.
2. Whether Omnia could avoid liability under the Tea Rose–Rectanus doctrine as a good-faith remote user.
3. Whether a plaintiff must prove willfulness to recover the defendant’s profits for trademark infringement under 15 U.S.C. § 1117(a) in the Ninth Circuit.
4. Whether the district court properly imposed sanctions under 28 U.S.C. § 1927.

## Decision

- Reversed the district court’s no-confusion finding; identical marks on identical goods created a strong likelihood of confusion, reinforced by Omnia’s admitted copying and overlapping marketing channels.
- Rejected Omnia’s Tea Rose–Rectanus defense; Omnia’s actual knowledge of Stone Creek’s prior use defeated any claim of good faith.
- Held that Ninth Circuit precedent still required willfulness as a prerequisite to an award of the infringer’s profits for traditional infringement under § 1114(1)(a), notwithstanding the 1999 amendment to § 1117(a); remanded for a willfulness determination under that standard.
- Affirmed in part and reversed in part the § 1927 sanctions order, narrowing the sanctionable conduct.
- Disposition: affirmed in part, reversed in part, and remanded.

## Legal Principles

- Use of an identical mark on identical goods strongly supports a finding of likelihood of confusion, particularly where the defendant intentionally copied the mark and goodwill.
- The Tea Rose–Rectanus doctrine operates as an affirmative defense for remote use only when the junior user adopted the mark in good faith; actual knowledge of the senior user’s mark defeats good faith.
- In the Ninth Circuit (at the time of this decision), willfulness remained a prerequisite to disgorgement of a defendant’s profits for infringement under § 1114(1)(a), even after the 1999 amendment to § 1117(a).
- Sanctions under 28 U.S.C. § 1927 require unreasonable and vexatious multiplication of proceedings; sanctions must be tied to conduct meeting that standard.

## Conclusion

The Ninth Circuit held that Omnia’s unauthorized use of Stone Creek’s identical mark on identical furniture was likely to confuse consumers, that Omnia could not claim a remote-user defense because it knowingly copied Stone Creek’s mark, and that profits required proof of willfulness under controlling circuit precedent, while partially narrowing litigation-conduct sanctions on appeal.


Stone Creek, Inc. v. Omnia Italian Design, Inc., 875 F.3d 426 (9th Cir. 2017)