Louis Vuitton S.A. v. Pun Yang Lee
875 F.2d 584 (1989)
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Rule of Law:
A defendant's willful blindness to the counterfeit nature of a product is sufficient to satisfy the statutory requirement of 'knowing' use under the Lanham Act, 15 U.S.C. § 1117(b), thus mandating an award of treble damages or profits and attorney's fees.
Facts:
- Mr. and Mrs. Lee, Korean immigrants with limited English proficiency, owned and operated K-Econo Merchandise, a retail shop in Chicago.
- The Lees purchased a small number of handbags and accessories imprinted with Louis Vuitton and Gucci trademarks from an itinerant peddler selling goods from the back of a van.
- The counterfeit items were of poor quality, lined with purple vinyl, and sold at a fraction of the price of genuine merchandise.
- Prior to the events leading to the lawsuit, customers had informed Mrs. Lee that the Vuitton and Gucci merchandise she was selling was counterfeit.
- On May 29, 1985, an investigator hired by Louis Vuitton, Melvin Weinberg, purchased a counterfeit Louis Vuitton camera case from K-Econo for $37.80.
Procedural Posture:
- Louis Vuitton S.A. sued Mr. and Mrs. Lee in the U.S. District Court for the Northern District of Illinois for trademark infringement.
- The parties entered a final pretrial order stipulating that the defendants had 'knowingly and wilfully' sold counterfeit goods.
- The district court granted a permanent injunction against the Lees.
- Following a bench trial solely on the issue of monetary relief, the district judge found for the defendants and awarded no damages.
- Vuitton, as appellant, appealed to the U.S. Court of Appeals for the Seventh Circuit, which vacated the judgment and remanded for the entry of findings of fact and conclusions of law.
- On remand, the district judge issued an opinion finding the Lees' infringement was not intentional and, based on equity, again denied all monetary relief.
- Louis Vuitton S.A., as appellant, appealed this second decision to the U.S. Court of Appeals for the Seventh Circuit, with the Lees as appellees.
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Issue:
Does a defendant's willful blindness to the counterfeit nature of goods constitute a 'knowing' use of a counterfeit mark, mandating an award of treble damages or profits and attorney's fees under 15 U.S.C. § 1117(b)?
Opinions:
Majority - Posner, Circuit Judge.
Yes. A defendant’s willful blindness to the counterfeit nature of goods satisfies the 'knowing' use requirement under 15 U.S.C. § 1117(b), which mandates an award of treble damages or profits and attorney's fees. The district court's finding that the Lees did not knowingly infringe was clearly erroneous. The circumstances surrounding the purchase of the goods—from an itinerant peddler at a very low price with poor workmanship—made it inconceivable that Mrs. Lee believed she was buying genuine articles. Failing to inquire further when presented with such obvious red flags constitutes willful blindness, which is legally equivalent to actual knowledge. The district court also erred by disregarding a pretrial stipulation where the Lees admitted to knowing and willful infringement and by improperly invoking 'equity' to deny all monetary relief; the Lanham Act's enhanced penalties are meant to deter counterfeiting, a widespread problem that cannot be controlled if small infringers are shielded from liability.
Dissenting - Ripple, Circuit Judge.
No. The appellate court should not have reversed the district court's judgment. An appellate court must defer to the factual findings and credibility determinations of the trial judge, who was present to observe the witnesses. The trial judge reasonably concluded that the issue of willfulness was tried by consent of the parties, effectively modifying the initial pretrial stipulation. As an appellate judge, it is not appropriate to substitute one's own judgment on credibility for that of the trial judge, who explicitly detailed his reasons for believing the defendants. Therefore, the district court's judgment should have been affirmed.
Analysis:
This decision significantly strengthens trademark enforcement by clarifying the standard of knowledge required for the harsh mandatory penalties under the Lanham Act. By equating willful blindness with actual knowledge, the court prevents defendants from escaping liability by deliberately ignoring obvious signs of counterfeiting. The opinion serves as a strong rebuke to district courts that might use equitable discretion to shield small-time infringers from the statute's strict monetary remedies. This precedent makes it easier for trademark holders to secure treble damages, reinforcing the deterrent effect of the law against the widespread problem of counterfeit goods.
