Opinions of the United 1995 Decisions States Court of Appeals for the Third Circuit

2-15-1995

Versa v Bifold Company Precedential or Non-Precedential:

Docket 94-5064

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Recommended Citation "Versa v Bifold Company" (1995). 1995 Decisions. Paper 50. http://digitalcommons.law.villanova.edu/thirdcircuit_1995/50

This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova University School of Law Digital Repository. It has been accepted for inclusion in 1995 Decisions by an authorized administrator of Villanova University School of Law Digital Repository. For more information, please contact [email protected]. UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT ________________

NO. 94-5064 ________________

VERSA PRODUCTS COMPANY, INC.

v.

BIFOLD COMPANY (MANUFACTURING) LTD.,

Appellant

___________________________________________________

On Appeal From the United States District Court For the District of New Jersey (D.C. Civ. No. 93-cv-02734) ___________________________________________________

Argued: May 12, 1994

Before: BECKER and LEWIS, Circuit Judges, and POLLAK, District Judge.*

(Filed February 15, 1995)

NORMAN H. ZIVIN, ESQUIRE (ARGUED) PETER D. MURRAY, ESQUIRE WENDY E. MILLER, ESQUIRE Cooper & Dunham 1185 Avenue of the Americas New York, NY 10036

ROBERT M. AXELROD Sills, Cummis, Zuckerman, Radin Tischman, Epstein & Gross, P.A. One Riverfront Plaza Newark, NJ 07102-5400 Attorneys for Appellant

*. The Honorable Louis H. Pollak, United States District Judge for the Eastern District of Pennsylvania, sitting by designation. JEFFREY CAMPISI, ESQUIRE (ARGUED) Sharkey & Campisi 188 Eagle Rock Avenue P.O. Box 419 Roseland, NJ 07068 Attorneys for Appellee

_______________________________________

OPINION OF THE COURT _______________________________________

BECKER, Circuit Judge.

This is a trade dress infringement action in which plaintiff

Versa Products Company, Inc. ("Versa") contends that defendant

Bifold Company (Manufacturing) Ltd. ("Bifold") infringed the

trade dress of Versa's B-316 directional control valve, a device

commonly used in control panels of offshore oil-drilling rigs to

facilitate emergency shutdowns, by marketing its Domino Junior

valve, which Versa maintains copies the product configuration of

the B-316.1 The action was brought under section 43(a) of the

Lanham Act,

(a) (West Supp. 1994), New Jersey's

Unfair Competition Law, 56 N.J.S.A. § 4-1 to -2 (1989), and New

Jersey's common law of unfair competition. Following a bench

trial the district court found that the trade dress of Versa's

valves had met the nonfunctionality and distinctiveness

requirements of our trade dress jurisprudence, and that there was

1 . As in Duraco Products, Inc. v. Joy Plastic Enterprises, Ltd.,

(3d Cir. 1994), "we will employ the designation `product configuration' to refer to trade dress alleged in the product itself, whether in a specific feature or in some combination or arrangement of features, and to distinguish that type of trade dress from `product packaging.'" a likelihood of confusion of the sources of Bifold's Domino

Junior and Versa's B-316 valves. Accordingly, the court entered

a permanent injunction against Bifold, precluding it from selling

its Domino Junior valve (in its present form) anywhere in the

United States. Bifold appeals all aspects of the district

court's rulings.

We need not reach the nonfunctionality and distinctiveness

questions because the appeal may be disposed of on the likelihood

of confusion issue, in connection with which we are called upon

to determine whether the jurisprudence that lowers the standard

to a "possibility of confusion" where the alleged infringer is a

"second comer" applies in the trade dress product configuration

context. We also must explicate the elements of the confusion

standard in this context. We conclude that the lowered standard

(applied by the district court) does not apply and that some but

not all of the "Scott factors," see Scott Paper Co. v. Scott's

Liquid Gold, Inc.,

(3d Cir. 1978), are pertinent,

because of policy considerations applicable in product

configuration cases. Applying this approach we conclude that the

district court's finding of a likelihood of confusion is clearly

erroneous. We will, therefore, reverse the order of the district

court and vacate the permanent injunction. I. FACTS AND PROCEDURAL HISTORY

Versa, a New Jersey corporation with subsidiaries abroad,

designs and manufactures pneumatic and hydraulic directional

control valves. Bifold, an English corporation, competes with

Versa and markets a line of control valves and related products

and services to the offshore oil industry. Versa alleges that

Bifold has engaged in unfair competition in its marketing of the

Domino Junior -- a valve manufactured by Bifold and adapted to

the harsh offshore oil and petrochemical environments -- by

copying the trade dress, i.e., the distinctive appearance, of the

product configuration of Versa's B-316 valve.

The most significant feature of valves designed for offshore

applications is their stainless steel composition, used to

withstand the corrosive effects of salt air and sour gas fumes.

In offshore drilling platforms these valves are typically aligned

in small control panels containing up to fifty modular valve

bodies with a standard configuration but which, by attaching one

of various actuators and making minor adjustments, may be adapted

to a variety of applications. The panel design engineers devise

the functional specifications of panels around the capacities of

particular valves, selecting valves based on their functionality,

reliability, availability, and price. The valves themselves are

not visible from the front of a control panel when installed;

only knobs, buttons, and status indicator actuators protrude. A. Versa's B-316 Valve

Versa began producing brass valves (its "V" series) in 1949.

Versa dresses the series, consisting at present of an entire line

of valves well known in the industry, with contoured lines and

shaping that the district court found "form a distinctive product

appearance that has been associated with Versa for decades." In

the late 1970's Versa designed the B-316 line of stainless steel

valves, the subject of this litigation. Versa initially

fashioned them of stainless steel bar stock, and the valves were

plain and unadorned. Because of the waste of valuable metal

associated with the machining process and the substantial manual

labor needed to drill each valve individually, Versa converted to

a cast version of the valve as soon as sales levels justified the

substantial economic investment in a casting mold.

The two versions of the valve serve the same function and

are interchangeable. Versa deliberately set about to give the

cast version of the B-316 the "Versa look," that is, to have it

resemble in appearance the V-series of Versa valves. FF 41.

Versa's desire to have the valve be clearly associated with Versa

in the market was a primary impetus for its election to manu-

facture the cast version of the B-316.

The modular B-316 valve is comprised of a valve body and,

optionally, one or more attached actuators used to manipulate the

moving parts in the valve body. The valve is a three-way valve,

meaning that it has three ports or openings (for the ingress or egress of gas or fluid), which are threaded to ¼" NPT, a national

standard and industry requirement. The ports open into an inner

chamber in the valve body, which houses a spool moved by an

actuator (such as a button, knob, or electronically controlled

solenoid actuator) to open or close the port, controlling fluid

flow.

The configuration and function of the actuators provided

with a valve are driven by customer demand; however, the use of

certain actuators (most of which Versa purchases from other

vendors) is standard with the B-316. Versa has used the same

knob actuator for 40 years, although many others are available.

It also uses a particular status indicator, which indicates the

valve's position; a particular button actuator, which is shrouded

to prevent accidental actuation; a self-produced manual latch,

which locks the valve spool in the open or closed position; and a

self-produced pilot actuator, which responds to pressure in an

attached fluid line to control the spool's position.

Located at each end of a valve is a flange, both of which

serve as faces to mount the actuators and to provide a flat

surface for attachment to the control panels; holes are drilled

into the flanges to allow the actuators to be securely mounted.

A longitudinal top rib runs along the top of the valve body to

allow customers to attach solenoid (computer controlled)

actuators, to provide strength, and to serve as a casting gate

(an opening in the casting mold through which the molten metal is poured). A smaller bottom rib was added to provide parallelism

in the product's appearance and to assist in the casting process.

Finally, the valve has three mounting holes which are positioned

to provide stable mounting to a panel or other flat surface.

Each aspect of the valve serves a specific function essential to

the valve's operation, cost, performance, or ease of manufacture.

The design of each actuator is functional. Functionality

dictates the overall cast design, but does not dictate its

external appearance.

The B-316 valve's mold imprints the manufacturer's name

("VERSA") and place of origin ("N.J. U.S.A.") on the valve.

Versa also stamps a date code and rivets a metal label displaying

the Versa name, logo, and part number onto the valve. Versa

currently dominates the United States market for stainless steel

valves. Aside from Bifold, only Versa sells cast stainless steel

valves; other competitors use a cylindrical bar stock. B. Bifold's DOMINO JUNIOR Series Valve

As part of Bifold's continuing efforts to expand its product

line, in 1985 it introduced the Domino series modular valves.

Although originally machined from standard bar stock (like

Versa's B-316), the Domino valves became sufficiently successful

to warrant the investment needed to design a cast version. An

outside casting company designed the cast version of the Domino;

Bifold had no involvement in the process. Like a B-316, the

Domino valve has three cylindrical ports, a top rib for housing a

solenoid feed, flanges, and a range of actuators.

Because the Domino was too large for many of its customers'

needs, however, Bifold designed the "Domino Junior" modular valve

in 1990, producing it at first from bar stock.2 In late 1991,

eight years after the cast version of the B-316 became available,

Bifold introduced its cast version of the Domino Junior. Bifold

at the time erroneously believed that Versa had a "monopoly" on

the wellhead control panel valve market, and created the cast

version of the Domino Junior to "bury Versa."

Bifold was aware of the B-316's appearance and design

features because it had seen the product at various trade shows.

The district court did not credit Bifold's claims that it de-

signed the Domino Junior as a scaled down version of the Domino

2 . A fact-finding inconsistent with the tenor of the ones described here is that "Bifold used the Domino Junior bar stock valve as an excuse to justify its look-alike cast version of the Domino Junior product." and that it did not copy the B-316.3 It found instead that,

before and during its design of the Domino Junior cast mold,

Bifold examined and largely copied Versa's B-316 valve, a sample

of which it had obtained through its agent in Denmark. For

example, the court found that Bifold, which regularly uses metric

sizes in its valves, took measurements from the B-316 and used a

metric conversion of the B-316's imperial standard size. Bifold

also sent a cast B-316 valve to Manchester Tool Services, which

it selected to be the manufacturer of the cast version of the

Domino Junior, as a model for the cast version of the Domino

Junior. The two valves (the B-316 and the Domino Junior) are

not, however, interchangeable in the field, and "replacing a

Versa B-316 cast valve with a Bifold Domino Junior cast valve in

an existing control panel could be problematic."

The district court also found that Bifold lacked the

expertise to design the cast version of the Domino Junior, had

presented misleading testimony about who produced a prototype

drawing of the Domino Junior, and had backdated documents to

create the false appearance that it had designed the valve. The

court found that BSA Precision Castings, Ltd. ("BSA"), which had

designed the cast version of the Domino valve, was involved in

the design of the cast version of the Domino Junior valve.

During the time that BSA participated in the design of the cast

version of the Domino Junior, it had in its possession drawings

3 . It also did not credit the claims of Bifold's experts. and castings of the B-316's major components, as well as Versa's

actuators. BSA had obtained the drawings, actuators, and actual

samples of valve components from Versa three years earlier when

it had provided Versa with a quote for the casting of the B-316.

The court found that BSA used this data to design a casting of

the Domino Junior valve as a look-alike of the Versa B-316,

despite the fact that Bifold had asked BSA to give "due

consideration to the appearance of the larger Domino valves."

Although the Domino Junior and B-316 do, in fact, look quite

similar, the district court described a number of differences

between the two manufacturers' valves. Because the Domino

Junior's ports extend outward from the valve body, whereas the B-

316's ports are flush with the valve body, the Domino Junior is

slightly wider than the B-316. The Domino Junior ports' threads

have metric dimensions. The Domino Junior is made of more metal

and weighs about thirty percent more than the B-316. The stroke

-- the distance an actuator must move the internal spool to

switch the valve's ports -- also differs from that of the B-316.

Because Bifold electroplates its valves, the Domino Junior body

has a duller finish than the B-316. The Domino Junior also has

thicker flanges and ribs than does the B-316. The valves'

mounting holes have different centers. Bifold purchases its

status indicators from a different company than Versa uses, and

these indicators have a different size, appearance, and

configuration from Versa's. Like Versa, Bifold produces its own manual latch, but makes it out of two cast pieces and gives it

rounded edges, whereas Versa uses a single piece of rectangular

bar stock material.

The Domino Junior valves are "block-before-bleed" (meaning

fluid flow is completely blocked during the moment required to

change states when the valve is activated), whereas the B-316

includes that feature only as an option. The Domino Junior ports

are universal (meaning that any port can be an inlet or an outlet

port), though Bifold customizes each valve as either normally

open or normally closed; in contrast, Versa offers universal

application only as an option. Like Versa, Bifold casts its name

into the Domino Junior's valve body and bolts onto it a metal

label prominently displaying the Bifold name.

Despite all these differences, the court concluded that

"[t]he Bifold Domino Junior valve and actuators are virtually

identical in external design and visual appearance to the Versa

B-316 valve." It found an identity in general body

configuration, body length, flanges, distance between ports,

valve mounting holes, actuator mounting holes, ribs, spring cap

(which returns the spool back to its original position), buttons,

button caps, status indicators, knobs, manual latching pins, and

pilot caps. The valve bodies, buttons, button caps, knobs,

status indicators, and manual latching mechanism used by other

competitors in the industry look quite different from both the

Domino Junior's and the B-316's. The court discounted the dissimilarity of the solenoid actuators attached to the valve

bodies by Versa and Bifold because only a small portion of

Versa's B-316 valves sold include solenoid actuators.

C. Marketing and Sales of the Valves

In order to determine whether Bifold had engaged in unfair

competition with Versa, the district court considered whether

consumers were likely to confuse the sources of the two

companies' valves in light of the ways in which the two valves

are marketed and sold. The court found that valves of this sort

are not sold off the shelf or selected on sight. Rather, both

manufacturers sell their valves based on functional

specifications detailed in schematic diagrams, manufacturers'

catalogs, or specification sheets and samples available at trade

shows and sales presentations. The valves are selected by multi-

digit part numbers identifying the particular variation desired.

The purchasers and users of the valves are qualified,

knowledgeable persons who comprehend the installation and use of

the valves. They typically prepare specifications designating

which manufacturer's valve they prefer to use in their system

before placing the order.

Versa, the more established manufacturer, has sold over

100,000 B-316 valves, and is currently selling over 16,000 per

year. This gives it a fifty to fifty-five percent market share

of valves sold for use in emergency shutdown systems in the

United States. Bifold has only recently begun marketing its Domino Junior valve in the United States, and immediately stopped

its efforts to open the United States market pending the outcome

of this litigation.

Versa and its B-316 valve have an excellent reputation for

producing a high quality product. This quality level is very

important in emergency shutdown offshore drilling, for the

failure of a valve could cause loss of human life and property as

well as severe environmental damage. Versa has therefore

subjected its B-316 valve to rigorous quality control tests, and

the valve has performed faithfully in the field.

The district court found that, because of the availability

and outstanding reputation of the B-316 cast valve for over ten

years, the overall appearance and contours of the B-316 have come

to distinguish the valve as Versa's (in the industry and to

Versa's customers), with the valve body constituting the most

defining aspect of the Versa look. The valve's overall

appearance assists Versa in marketing its product, and Versa

features this appearance widely in trade journals, catalogues,

brochures, bulletins, trade shows, and sales exhibitions. The

court also found that Versa deliberately created the B-316's

distinctive appearance (contrasting with the other valves

available in the market at the time) to identify the valve in the

market as a Versa product.

The district court found that Bifold hired Versa's former

regional marketing manager of six years, James Carr, III, to sell its new Domino Junior valve. Carr sells both Versa and Bifold

valves, sometimes to the same customers. To solicit Domino

Junior sales in early 1993, Carr approached Gordon Fraleigh, an

employee of the Fraleigh Company, which for years had sold Versa

products to customers in the petroleum industry. Carr

represented to Fraleigh, whom he had known for many years, that

Bifold had developed an "exact copy" of the B-316 which would

"fit in perfect" as a substitute for the B-316, and inquired

whether Fraleigh would like to distribute the Domino Junior.

Thereupon, Fraleigh became confused as to the relationship

between Versa and Bifold. Bifold has also contemplated

contacting other Versa distributors to sell its valves. D. Likelihood of Confusion

Beyond the confusion on Fraleigh's part, the district court

found that some, but not all, consumers of the B-316 valves are

sophisticated, and that the likelihood of confusion as to the

source of the Domino Junior is enhanced with respect to the

unsophisticated consumers. This finding is undercut by the

district court's finding, see supra p.12, that the purchasers are

knowledgeable and understand the valves. We note, however, that

these findings might be resolved by noting that the latter

finding assumes expansion of Versa's market. Indeed, the opinion

later suggests that any unsophisticated consumers exist only as

"potential new customers" in "untapped" markets, that is, that

all the current customers are sophisticated. See Mem. Op. at 90.

Because there will in those potential expansion markets be no

likelihood of confusion based on the district court's theory

(namely, that consumers familiar with Versa's trade dress will

mistakenly believe Bifold is affiliated with Versa, see infra at

68-74), we will ignore the court's "expansion" finding and

consider only its finding that the purchasers are knowledgeable.

In addition, one customer forwarded to Bifold a telefax

initially addressed to Versa. And Frank Vetter, a Vice President

and Chief Operating Officer of Versa, testified that he was

advised of confusion of the products at trade shows.

Because of the valves' "virtual identity in appearance" and

the fact that Bifold has not sold products in the United States previously, the district court concluded that a Versa customer in

the United States might reasonably assume that Versa and Bifold

are related companies or that the Domino Junior is otherwise

related to Versa. However, since Bifold had sold only two valves

in the United States, both to distributors, the court found there

had been little opportunity for Versa to document instances of

actual confusion.

II. THE DISTRICT COURT'S LEGAL CONCLUSIONS4

The district court noted at the outset that Section 43(a)

provides a cause of action for unprivileged imitation of trade

dress -- defined as the "overall design or appearance of a

product or its packaging" -- because it involves actual or

potential deception. Trade dress, it held, consists not of

individual features, but of the overall appearance of the

product. We turn then, to the court's more specific legal

conclusions.

Recognizing that unpatented functional features may be freely copied regardless of any likelihood of confusion -- and

Versa has not patented the design of its B-316 valve -- the

district court first concluded that the trade dress of the B-316

4 . Subject matter jurisdiction was grounded in the federal question statute,

(West 1993), since Versa's cause of action arises under Section 43(a) of the Lanham Act,

(a) (West Supp. 1994). Personal jurisdiction was based on the defendant's consent. The court exercised supplemental jurisdiction over plaintiff's pendent state law claim. was nonfunctional. The court next concluded that the B-316's

trade dress was "inherently distinctive,"5 or, in the

alternative, possessed acquired distinctiveness because it had

acquired secondary meaning.6 The distinctiveness finding is

problematic because the district court evaluated inherent

distinctiveness using a legal standard that this court has since

held to be improper. See Duraco Prods., Inc. v. Joy Plastic

Enters., Ltd.,

(3rd Cir. 1994) (rejecting

the trademark distinctiveness taxonomy as the measure of inherent

distinctiveness for trade dress in product configurations). And

although we can scarcely blame the district court, whose analysis

of functionality largely tracked this court's various legal

formulations, its finding of nonfunctionality is also problematic

in view of the conflicting formulations of functionality used, as

5 . The court concluded that the trade dress was inherently distinctive because it was "arbitrary," meaning it was "not dictated by functional considerations" (which appears to be the same standard that the court employed for its functionality inquiry). 6 . "Secondary meaning" denotes that the purchasing public associates the design of the product with a particular source. Secondary meaning need be proven only if the product is not inherently distinctive. The court held that secondary meaning was established by the length and continuity of the plaintiff's use -- here, continuously for 10 years; by the strength of the buyers' mental associations -- here, purchasers associate the appearance of the B-316 with Versa; by the extent of sales and advertising -- here, Versa has sold tens of thousands of B-316 valves and has advertised widely; and, most persuasively according to the district court, by the evidence of intentional copying. outlined in the margin.7 Although we have misgivings about these

two issues, it is the district court's third conclusion that

forms the focus of our opinion today.

7 . The district court determined that a product feature is functional if and only if "it affects their purpose, action or performance, or the facility or economy of processing, handling or using them." Treating functionality as a matter for fact finding, the court placed the burden on Versa to show that "its trade dress serves no purpose except to identify Versa." But then it held that trade dress is functional only "if it is essen- tial to the use or purpose of the article or . . . affects the cost or quality of the article," that a design is "essential" "only if it is dictated by the functions to be performed," and that a design is "essential to [an item's] use" only if the particular design of the whole assembly is essential (internal quotation marks omitted, emphases supplied). The court's inquiry thus focused on the extent to which the design feature was related to the usefulness of the product. Then, setting forth yet a third standard, the court held that a product design is nonfunctional if, viewed as a whole, the design "primarily serves a legitimate trademark purpose -- identifying the source of the product -- . . . even though it might also serve functional purposes" (internal quotation marks omitted). The several standards for functionality described by the district court reflect varying articulations found in opinions of this court. Compare, e.g., Merchant & Evans, Inc. v. Roosevelt Bldg. Prods. Co., 963 F.2d at 635 ("`Proof of nonfunctionality generally requires a showing that the element of the product serves no purpose other than identification.'") (quoting SK&F, Co. v. Premo Pharmaceutical Lab., Inc.,

(3d Cir. 1980)) with Merchant & Evans, Inc., 963 F.2d at 634 ("`[T]he question is whether a particular feature of a product is substantially related to its value as a product or service, i.e., if the feature is a part of the "function" served, or whether the primary value of a particular feature is the identification of the provider . . . .'") (quoting United States Golf Ass'n v. St. Andrews Sys.,

(3d Cir. 1984)). The district court concluded that although a large number of the B-316's features were functional, their combination into a particular form was not. It found that the B-316 valves' overall design did not result from "significant cost and manufacturing considerations," and that if the appearance of the B-316 were altered, "nothing of substantial value in the product [would be] lost." In sum, the district court found that "[t]he appearance The district court held that to prevail on a trade dress

infringement claim, a plaintiff must demonstrate a likelihood of

confusion, but not actual confusion. It held that Versa could do

so here if it could show that an appreciable number of buyers are

likely to become confused as to the origin of the Domino Junior

valve. Importantly, the court further held that the threshold

for likelihood of confusion is lower when a newcomer (or "second

comer") violates a long-established trade dress.

The district court then seemed to apply the ten factors for

likelihood of confusion that this court enumerated in Scott Paper

Co. v. Scott's Liquid Gold, Inc.,

(3d Cir. 1978).

See CL 57. Under Scott, the threshold issue is the question of

similarity of product appearances, and the court found that the

Domino Junior's appearance was "virtually identical" to the B-

(..continued) of the Versa B-316 valve presents a particular combination and arrangement of design elements that are original to plaintiff's valve, that identify it as a valve of Versa . . . and that distinguish it from other valves. This arrangement of features is not required by the function of the valve itself and is entitled to protection." Pointing to other competing valves, the court found that Bifold could compete with Versa's B-316 without copying Versa's particular configuration. A party entering a market, the court continued, has a duty "to so name and dress his product as to avoid likelihood of users confusing it with the product of the first comer." Since, in its view, Bifold had overtly and intentionally copied Versa's trade dress in direct competition with Versa, the court concluded that Bifold had infringed Versa's trade dress and engaged in unfair competition. While Bifold could produce a valve with three ports with modular actuators and solenoid feeds, the court said, Bifold could not copy the particular, arbitrary combination and arrangement of design elements that identify and distinguish Versa valves. 316's and hence that there was a likelihood of confusion. The

district court reasoned that Bifold's clear designation on the

product that it was the manufacturer, while relevant to Bifold's

duty to take reasonable steps to prevent deception, was only one

factor to be assessed in resolving the confusion issue.

The district court found that "[a]n intent to copy trade

dress and/or finding of copying by a junior user is often alone

dispositive of a finding of likelihood of confusion," and that

since Bifold had copied Versa's design there was a likelihood of

confusion. The court also found a likelihood of confusion

because of the "competitive proximity" of the goods, which

"strongly favors a finding of confusion," since the court found

that the Domino Junior can replace the B-316 at the point of

conception of the panels.8

Although the district court concluded that Versa was not

entitled to damages because Bifold had only sold two of its

valves in the United States, it granted Versa permanent

injunctive relief on the ground that the company's good will was

threatened by Bifold's attempt to reap the benefits of Versa's

reputation (by basing the appearance of the Domino Junior on a

8 . The court additionally considered the "strength" of Versa's trade dress, evidence (albeit slim) of actual confusion, the method in which the valves are sold, and the labeling of Bifold's Domino Junior. Finally, the court also essentially held that New Jersey's Unfair Competition Law, 56 N.J.S.A. § 4-1 to -2 (1989), and its common law of unfair competition parallel the unfair competition cause of action under Section 43(a), and hence that Versa prevailed on those causes of action as well. Versa product). The court determined that the injunction had to

cover not only the appearance of the article actually the subject

of the lawsuit, but also all "confusingly similar" appearances.

It therefore crafted an injunction enjoining Bifold from

manufacturing, selling, etc., any cast valve which "has an

external design and visual appearance confusingly similar to the

cast Versa B-316 valve, described herein and shown in Exhibit A."

Order and Injunction at 5.9

The court then held Versa to be entitled to attorneys' fees.

Recognizing that attorneys' fees can be awarded to the

"prevailing party" only in "exceptional cases," the court found

Bifold's deliberate and willful infringement to be exceptional.

This appeal followed. We have jurisdiction under

.

9 . The court concluded its opinion with the caveat that, should its injunction be overturned, "an alternate albeit less efficacious course can be considered," namely, attaching a metal label providing "made in England" and "not a Versa product" onto the Domino Junior. Mem. op. at 92 n.3. III. DISCUSSION

To obtain trade dress protection for the B-316 under section

43(a) of the Lanham Act, Versa had to prove that (a) the design

was non-functional, (b) the design was inherently distinctive or

distinctive by virtue of having acquired secondary meaning, and

(c) there was a likelihood of confusion. See Two Pesos, Inc. v.

Taco Cabana, Inc.,

(1992).10 As discussed

supra, the district court found that Versa had met each of these

requirements, and it therefore permanently enjoined Bifold from

copying the B-316's trade dress and ordered Bifold to pay

attorney's fees. We limit our discussion to the final element

Versa needed to establish to prevail on its trade dress

infringement claim -- the likelihood of consumer confusion as to

the source of Bifold's Domino Junior.

Such consumer confusion is, of course, at the heart of

trademark law. See, e.g., Freixenet, S.A. v. Admiral Wine &

Liquor Co.,

(3d Cir. 1984). Likelihood of

confusion is a factual matter, subject to review for clear error,

see Ciba-Geigy Corp. v. Bolar Pharmaceutical Co.,

(3d Cir. 1984), which exists when, "giving all due deference

to the opportunity of the trial judge to evaluate the credibility

of witnesses and to weigh the evidence," Litton Sys., Inc. v. Whirlpool Corp.,

(Fed. Cir. 1984) (emphasis

10 . New Jersey statutory and common law of unfair competition require essentially the same elements. See SK&F, Co.,

. omitted) (citing Inwood Lab., Inc. v. Ives Lab., Inc.,

,

(1982)), we are "left with a

definite and firm conviction that a mistake has been committed,"

Anderson v. Bessemer City,

,

(1985).

A. "Likelihood" vs. "Possibility" of Confusion

Generally, "the law does not require that a competitor

insure against all possible confusion or the likelihood thereof."

CHARLES E. MCKENNEY & GEORGE F. LONG, III, FEDERAL UNFAIR COMPETITION:

LANHAM ACT § 43(A) § 3.08[1], at 3-71 (1989, Release #5, May 1994)

[hereinafter MCKENNEY & LONG, FEDERAL UNFAIR COMPETITION]. Rather, a

plaintiff may prevail in a trade dress infringement action only

if it shows that an appreciable number of ordinarily prudent

consumers of the type of product in question are likely to be

confused as to the source of the goods. See, e.g., Nikon, Inc.

v. Ikon Corp.,

(2d Cir. 1993); West Point Mfg.

Co. v. Detroit Stamping Co.,

, 589 & n.2 (6th Cir.

1955). "The mere possibility that a customer may be misled is

not enough." Surgical Supply Serv., Inc. v. Adler,

(3d Cir. 1963).

Although this usual formulation of trade dress infringement

requires a showing of a likelihood or probability of confusion,

this standard has been relaxed in some cases. Where an alleged

infringer was new to an area and the plaintiff was well-

established, this court has at times replaced the "likelihood of confusion" requirement with a lower "possibility of confusion"

standard. These cases have all involved actions for trademark or

tradename infringement, not trade dress, and certainly not trade

dress alleged in a product configuration. See Merchant & Evans,

Inc. v. Roosevelt Bldg. Prods. Co.,

, 637-38 (3d Cir.

1992) (considering "possibility of confusion" with respect to "a

name or mark," in particular, a "`Z' logo" alleged to be

confusingly similar to a "`Zip-Rib' trademark"); Country Floors,

Inc. v. Partnership Composed of Gepner & Ford,

(3d Cir. 1991) (directing application of "possibility of

confusion" standard to "Country Tiles" and "Country Floors" names

or marks); Telechron, Inc. v. Telicon Corp.,

("a case of a first coined word and a second coined word

resembling it"). We must therefore consider whether the

"possibility of confusion" standard should govern product

configuration trade dress cases. Since unfair competition law

regarding product configurations will diverge substantially in

its incidents from the law regarding product packaging, Duraco,

, we begin our consideration by examining the

rationale underlying the "possibility of confusion" cases.

Telechron, Inc. offered some explanation for the lowering of the requirements for showing trademark infringement in certain

situations. In that case the plaintiff used the name "Telechron"

starting in 1919 as a trademark for its electric clocks and other

timing and switching devices. The defendant Telicon Corporation began marketing radio and television sets under the "Telicon"

name for the first time in 1946. Agreeing with the district

court, this court held that "`Telicon' is a colorable imitation

of `Telechron' within the conception of trade-mark infringement."

Telechron, Inc.,

.

In an opinion by Judge Hastie, the court explained that the

"`degree of resemblance necessary to constitute an infringement

is incapable of exact definition.'" Telechron, Inc.,

(quoting McLean v. Fleming, 96 U.S. (6 Otto) 245, 251

(1877)). We emphasized the strong aural similarity of the marks

and the evidence of actual confusion, concluding that the

evidence was "adequate substantiation of tendency to confusion

inherent in the obvious similarity of the words themselves."

Telechron, Inc.,

. Only then, expressly as an

additional consideration, did we observe that this was "a type of

case where a court properly requires the second comer to stay

clearly away from the original mark," and thus that "`any

possible doubt of the likelihood of damage should be resolved in

favor of the [first user].'"

at 908-09 (quoting Lambert Pharmacal Co. v. Bolton Chem. Corp.,

(S.D.N.Y.

1915) (Learned Hand, J.)).

We recognize that application of the "keep clear" policy

embodied by the trademark "possibility of confusion" standard

would not be entirely senseless in the context of alleged

infringement of trade dress, even where the dress consists not in a product's packaging but in a nonfunctional product

configuration. To the extent that product configurations are

protectable, a Johnny-come-lately copier arguably creates a

greater risk than one who more promptly markets a copy that

consumers will be misled by a substantially identical

configuration into thinking the newcomer's product to be that of

the established business, for there will have been more time for

the public to come to associate that configuration with a single

source. In and of itself, however, that is no reason to change

the measure of confusion (from "probability" to "possibility")

required to make out a Lanham Act violation. Rather, it is at

most a factor properly taken into account in assessing the

likelihood of confusion.

The trademark "possibility of confusion" standard must

therefore be supported by other considerations. We believe that

the primary reasons for lowering the measure of confusion when a

newcomer copies an established trademark are the general lack of

legitimate reasons for copying a competitor's mark, see, e.g.,

American Chicle Co. v. Topps Chewing Gum, Inc.,

(2d Cir. 1953) ("`Why [the defendant] should have chosen a

mark that had long been employed by [the plaintiff] and had

become known to the trade instead of adopting some other means of

identifying its goods is hard to see unless there was a

deliberate purpose to obtain some advantage from the trade which

[the plaintiff] had built up.'"), and the high degree of reliance by consumers on trademarks as indicators of the source of

products. Whether or not these considerations translate to the

realm of product packaging, we think that with respect to product

configurations the significance of each of the factors is greatly

diminished.

First, the mere copying of product configurations does not

suggest that the copier was necessarily trying to capitalize on

the goodwill of the source of the original product. See Duraco,

; see also infra at 40-48 (discussing implications

of defendant's intent to copy). A presumption to the contrary

would be mandated, if ever, only in the narrow class of cases

where both (1) a product configuration is desirable to consumers

primarily because of the configuration's inherent or acquired

identification with the original source, and (2) the copier

adopts affirmatively misleading labelling and/or marketing for

the copied product, cf. Quaker Oats Co. v. General Mills, Inc.,

(7th Cir. 1943) ("The pirate flies the flag of

the one he would loot. The free and honorable non-pirate flies

the colors of his own distinctive ensign.").

Second, although a product's trade dress in the form of its

configuration could function as an indicator of the product's

source, product configurations in general are not reliable as

source indicators, for functional configurations are not

protected and thus may be freely copied, see Duraco,

, and inherently distinctive configurations will be rare, see

. Since substantially identical

products are often sold by different manufacturers under

different names, consumers are accustomed to relying on product

packaging and trademarks to identify product sources. Indeed, if

any modification of the likelihood of confusion standard is

justified in the product configuration context, the standard

might well be heightened, perhaps to a "high probability of

confusion." Nevertheless, we see no need to adopt such a

standard today, preferring for now merely to reject the

"possibility of confusion" standard for product configuration

infringement cases, and adhering to the conventional "likelihood

of confusion" standard.

B. The Scott Factors in the Product Configuration Context

Having concluded that the appropriate standard in this

product configuration trade dress infringement action is a

likelihood of confusion, we must determine what that inquiry

entails in this context. Although the law of trade dress in

product configurations will differ in key respects from the law

of trademarks or of trade dress in product packaging, settled law

provides the starting point for our analysis.

We stated in Ford Motor Co. v. Summit Motor Prods., Inc.,

, 297 (3d Cir.), cert. denied,

(1991),

that the analysis of the likelihood of confusion requires a court

to evaluate a number of factors: (1) the degree of similarity between the owner's mark and the alleged infringing mark; (2) the strength of [the] owner's mark; (3) the price of the goods and other factors indicative of the care and attention expected of consumers when making a purchase; (4) the length of time [the] defendant has used the mark without evidence of actual confusion arising; (5) the intent of the defendant in adopting the mark; (6) the evidence of actual confusion; (7) whether the goods, though not in competition, are marketed through the same channels of trade and advertised through the same media; (8) the extent to which the targets of the parties' sale efforts are the same; (9) the relationship of the goods in the minds of the public because of the similarity of function; (10) other facts suggesting that the consuming public might expect the prior owner to manufacture a product in the defendant's market.

Id. at 293 (citing Scott Paper Co. v. Scott's Liquid Gold, Inc.,

(3d Cir. 1978)); accord Charles Jacquin et Cie, Inc. v. Destileria Serralles, Inc.,

(3d

Cir. 1990); cf. RESTATEMENT (THIRD) OF UNFAIR COMPETITION § 21 (Tent.

Draft No. 2, Mar. 23, 1990). This test was developed not for

product configuration cases but for "cases of alleged trademark

infringement and unfair competition by a producer of a non-

competing product," see Fisons Horticulture, Inc. v. Vigoro

Indus., Inc.,

(3d Cir. 1994), and not all of the

factors will be appropriate for or function the same way with

respect to trade dress inhering in a product configuration, so we

consider them in turn. 1. Similarity of Appearance (Scott Factor 1)

In trademark infringement cases, the first and primary

factor to be considered in the likelihood of confusion inquiry is

"the degree of similarity between the owner's mark and the

alleged infringing mark." See Ford Motor Co.,

.

In trade dress infringement cases where product packaging is at

issue, the corresponding factor is the similarity of the

protectable trade dress. Similarity of appearance is properly

considered paramount in trademark and product packaging trade

dress infringement cases, for unless the allegedly infringing

mark or dress is substantially similar to the protectable mark or

dress, it is highly unlikely that consumers will confuse the

product sources represented by the different marks or trade

dresses.

For the same reason, substantial similarity of appearance is

necessarily a prerequisite to a finding of likelihood of

confusion in product configuration cases. Unlike in trade mark

or product packaging trade dress cases, however, a finding of

substantial similarity of trade dress in a product configuration

does not by itself strongly suggest a likelihood of confusion.

Consumers have grown accustomed to relying on trademarks as

trustworthy indicators of the source of the product: that is the

point of a trade mark. Perhaps to a somewhat lesser extent,

consumers also rely on other aspects of product packaging to

identify the manufacturer. Such behavior is rational, for in a trade mark or product packaging case, all the consumer usually

has to go on to identify the source of the product is the

trademark and packaging (and any marketing featuring that mark or

packaging).

In a product configuration trade dress infringement case, by

contrast, consumers do not have to rely on a potentially

distinctive configuration to identify the source of the

product;11 rather, they can generally look to the packaging,

trademarks, and advertising used to market the product, which are

typically much less ambiguous. Consumers therefore have less

need, and so are much less likely, to rely on a product

configuration as an indicator of the product's source.

Accordingly, they are less likely to be confused as to the

sources of two products with substantially similar

configurations. Thus, in trade dress infringement suits where

the dress inheres in a product configuration, the primary factors

to be considered in assessing likelihood of confusion are the

product's labeling, packaging, and advertisements.12 "The most

common and effective means of apprising intending purchasers of

11 . The product configuration may have acquired distinctiveness, or it may be inherently distinctive. 12 . This observation is consistent with our discussion of the Scott factors (also known as the Lapp factors, after Interpace Corp. v. Lapp, Inc.,

(3d Cir. 1983)) in Fisons Horticulture, Inc.,

n.11, where we stated: "The weight given to each factor in the overall picture, as well as its weighing for a plaintiff or defendant, must be done on an individual fact-specific basis." the source of goods is a prominent disclosure on the container,

package, wrapper, or label of the manufacturer's or trader's name

. . . [and when] that is done, there is no basis for a charge of

unfair competition." Venn v. Goedert,

(8th

Cir. 1963), quoted in Litton Sys., Inc.,

.

Indeed, except where consumers ordinarily exercise virtually

no care in selecting a particular type of product (as may be the

case with inexpensive disposable or consumable items, cf.

(cookies)), clarity of labeling in packaging and

advertising will suffice to preclude almost all possibility of

consumer confusion as to source stemming from the product's

configuration. Cf. Bose Corp. v. Linear Design Labs, Inc.,

(2d Cir. 1972) ("The presence of [the source's]

name on the product [stereo speaker cabinets] goes far to

eliminate confusion of origin.") (emphasis supplied);

("[T]here is hardly likelihood of confusion or palming off when

the name of the manufacturer is clearly displayed."). 2. Strength of the Owner's Mark (Scott Factor 2)

In trademark cases, the strength of the owner's mark

directly affects the likelihood that consumers will be confused

as to the sources of products bearing substantially similar

marks. Strength includes both "[d]istinctiveness on the scale of

trademarks" and "[c]ommercial strength, or marketplace

recognition." Fisons Horticulture, Inc.,

. A

strong trademark is thus one that carries widespread, immediate

recognition that one producer (even if unknown) is associated

with the mark, and so with the product. If a second comer adopts

a mark substantially identical to a strong mark, there is a

correspondingly high likelihood that consumers will mistakenly

associate the newcomer's product with the owner of the strong

mark. The same may be said of a "strong" trade dress consisting

of a product's packaging.

But these observations do not translate literally into the

product configuration context. As we have explained elsewhere,

the trademark distinctiveness scale is ill-suited for application

to trade dress inhering in a product configuration. See Duraco,

. Having rejected the distinctiveness scale in

this context, we are left with commercial strength as the measure

of trade dress strength in a product configuration. Yet strength

of a product configuration must mean more than the ability of large numbers of consumers to identify the configuration as

coming from a particular producer. This would sanction too much reliance by consumers on product designs that, lacking the

protection of a patent, are in large measure copyable at will.

Cf. Duraco,

(criticizing the "capable of

distinguishing" interpretation of distinctive trade dress).

Rather, "strength" of product configuration as relevant to

determining likelihood of confusion on the part of ordinarily

careful consumers should be found only if consumers rely on the

product's configuration to identify the producer of the good.

This may perhaps be the case with products purchased largely

because of their appearance, such as "Carebears," cf. American

Greetings Corp., 807 F.2d at 1142. Such focus, however, is not

generally found in and should not be encouraged in the industrial

design context, where product appearance typically plays a lesser

role in buyers' selection processes. Hence, to differentiate

between these types of product configuration cases, courts should

require evidence of actual reliance by consumers on a particular

product configuration as a source indicator before crediting that

configuration's "strength" toward likelihood of confusion. 3. Attention Expected of Consumers (Scott Factor 3)

The third Scott factor is "the price of the goods and other

factors indicative of the care and attention expected of

consumers when making a purchase." "The greater the care and

attention, the less the likelihood of confusion." Fisons

Horticulture, Inc.,

n.12. We believe that this

factor takes on enhanced importance when a claim is made for

infringement of trade dress in a product configuration, both as a

result of the intersection of the patent laws with the Lanham

Act, and as a function of the difference between a trademark and

a product configuration.

The penumbra of the federal patent laws restricts the degree

to which courts may grant legal recognition of consumer reliance

on product configurations as source indicators, for their limited

scope of protection impliedly imposes restraint on the workings

of Section 43(a). Accordingly, we must bear in mind the Supreme

Court's counsel that "mere inability of the public to tell two

identical articles apart is not enough to support an injunction

against copying . . . that which the federal patent laws permit

to be copied." Sears, Roebuck & Co. v. Stiffel Co.,

,

(1964).13 "[T]he federal policy,

13 . We recognize that we deal here not only with state unfair competition law but also with a federal statute. It is therefore true that the Supremacy Clause does not, as in Sears, Roebuck & Co.,

, and Compco Corp. v. Day-Brite Lighting, Inc.,

,

(1964), operate to bar Section 43(a) from protecting trade dress in the form of the product configuration of Versa's B-316 valve. found in Art. I, § 8, cl. 8, of the Constitution and in the

implementing federal statutes, of allowing free access to copy

whatever the federal patent and copyright laws leave in the

public domain," Compco Corp. v. Day-Brite Lighting, Inc.,

,

(1964), is "an ever-present

consideration," MCKENNEY & LONG, FEDERAL UNFAIR COMPETITION § 5.03, at

5-25.

Furthermore, one expects a consumer exercising ordinary care

to ascertain the source of a product to rely much more on

packaging, trademarks, and advertising, which if not deceptive

tend to reveal the product's source unambiguously, than on the

product configuration, which usually does not contain an explicit

statement of the producer's identity. While it might be shown

that consumers in fact rely on a particular product's

configuration to identify its source, such deviation from the

normal pattern (i.e, from reliance on trademarks, packaging, and

advertising) would be rare. Because clear labeling thus should

generally be legally and factually sufficient to remedy confusion

where unpatented product configurations are at issue, clarity of

labeling (and marketing) must be taken into account in

considering whether there is a likelihood that consumers

exercising ordinary care will be confused as to the sources of substantially identical products.

Much as courts are required to police the boundaries of

similarity within which a jury may be permitted to find a likelihood of confusion under the Lanham Act, Country Floors,

Inc.,

, courts must also establish the perimeters

of ordinary care that constrain likelihood of confusion. The

following non-exhaustive considerations should guide a court's

determination of the standard of ordinary care for a particular

product. Inexpensive goods require consumers to exercise less

care in their selection than expensive ones. The more important

the use of a product, the more care that must be exercised in its

selection. In addition, "the degree of caution used . . .

depends on the relevant buying class. That is, some buyer

classes, for example, professional buyers . . . will be held to a

higher standard of care than others. Where the buyer class

consists of both professional buyers and consumers, . . . . the

standard of care to be exercised by the reasonably prudent

purchaser will be equal to that of the least sophisticated

consumer in the class." Ford Motor Co.,

. 4. Actual Confusion or Lack Thereof (Scott Factors 4 & 6)

The fourth Scott factor is "the length of time defendant has

used the mark without evidence of actual confusion arising."

While we hold that this factor applies to product configuration

cases as well as to trade mark and product packaging cases (for

it is obviously relevant), we take this opportunity to underscore

the role of the "lack of actual confusion" factor. If a

defendant's product has been sold for an appreciable period of

time without evidence of actual confusion, one can infer that

continued marketing will not lead to consumer confusion in the

future. The longer the challenged product has been in use, the

stronger this inference will be.

"Evidence of actual confusion" (the sixth Scott factor

bearing on likelihood of confusion) is similarly relevant: the

more evidence of actual confusion that a plaintiff can muster,

the stronger the likelihood of confusion in the future, but lack

of evidence of actual confusion (at least where the time period

that the two products have been in competition is short or "when

the particular circumstances [do not] indicate such evidence

should have been available," AMF Inc. v. Sleekcraft Boats,

(9th Cir. 1979)) does not raise an inference that

there is no likelihood of confusion. As the case law makes

clear, proof of actual confusion is not required for a successful

trade dress infringement action under the Lanham Act. Ford Motor

Co.,

(quoting Opticians Ass'n v. Independent Opticians,

(3d Cir. 1990)); accord 2 J. THOMAS

MCCARTHY, TRADEMARKS AND UNFAIR COMPETITION § 23:2 (2d ed. 1984); id. §

23:20.

We see no reason that these factors would not also apply to

product configuration cases. However, we emphasize again, see

supra at 35-37, that to make out unfair competition a plaintiff

must show a likelihood that a consumer exercising ordinary care

to discover the identity of the source would suffer confusion or

be mistaken because of the appearance of the allegedly infringing

product configuration. Thus, instances of actual confusion may

not weigh in favor of a finding of likelihood of confusion unless

the confused consumer was acting with the care expected of

consumers purchasing the type of good at issue. See G.D. Searle

& Co. v. Hudson Pharmaceutical Corp.,

, 840 & n.6

(1983) (ignoring testimony of witness who "was not acting as a

reasonably prudent consumer of the type of goods in issue when

purchasing the product"). 5. Defendant's Intent (Scott Factor 5) The fifth Scott factor is "the intent of the defendant in

adopting the mark." Whatever merit this factor may have in the

context of trade mark and product packaging trade dress cases, we

doubt that it is an appropriate consideration in a trade dress

infringement case where the trade dress is alleged in the product

configuration itself. In the likelihood of confusion inquiry in

trademark cases and product packaging trade dress cases, we do

not focus on a defendant's bare intent to adopt a mark or product

packaging substantially identical to a plaintiff's mark or

packaging, since there is little basis in fact or logic for

supposing from a defendant's intent to copy (without more) that

the defendant's actions will in fact result in confusion. Thus,

what we have held is that a defendant's intent to confuse or

deceive consumers as to the product's source may be highly

probative of likelihood of confusion. See American Home Prods.

v. Barr Lab., Inc.,

(3d Cir. 1987) (product

packaging case -- color of pain relief medication); see also

Fisons Horticulture, Inc.,

(identifying "intent

of promoting confusion and appropriating the prior user's good

will" as appropriate inquiry in forward confusion cases)

(internal quotation marks omitted) (trademark case -- marks

"Fairway" and "Fairway Green"); Sands, Taylor & Wood Co. v. Quaker Oats Co.,

(7th Cir. 1992) ("[T]he

defendant's intent is relevant to the issue of likelihood of

confusion only if he intended to palm off his products as those of another." (internal quotation marks omitted) (trademark case

-- words "Thirst Aid" used in advertising campaign); First Brands

Corp. v. Fred Meyer, Inc.,

(9th Cir. 1987)

("Intent of a defendant in adopting his trade dress is a critical

factor, since if the trade dress were adopted with the intent of

depriving benefit from the reputation of the plaintiff, that fact

alone may be sufficient to justify the inference that there is a

confusing similarity.") (emphasis supplied) (product packaging

case -- color and shape of antifreeze jug).

Because American Home Products involved a claim that the

color of a rival producer's ibuprofen tablet infringed the trade

dress of the plaintiff's Advil tablet, we believe that the case

is closer to a product packaging case than a product

configuration case. Even were we to consider it a product

configuration case, however, American Home Products is consistent

with our present discussion of defendant's intent. Judge Seitz's

opinion did not hold that independent significance must be

accorded a defendant's mere intent to copy; rather, it held that

"intent to confuse might be highly probative of likelihood of

confusion" and that "[a]t most, defendant's intent is a factor tending to suggest likelihood of confusion." American Home

Prods., Inc.,

(emphases supplied). In what

follows, we simply clarify this circuit's intent-to-confuse rule

for product configuration cases, delineating the circumstances

under which a defendant's intent to confuse or deceive consumers may be considered a factor in the likelihood of confusion

inquiry.

We realize that some courts have adopted a broader rule

holding that a defendant's intent to copy strongly supports an

inference of likelihood of confusion. See, e.g., Bauer Lamp Co.

v. Shaffer,

(11th Cir. 1991); Mobil Oil Corp.

v. Pegasus Petroleum Corp.,

(2d Cir. 1987).

Like the intent-to-confuse rule, this intent-to-copy rule relies

essentially on a (rebuttable) presumption of efficacy -- although

the intent-to-copy rule requires a double inference, see, e.g.,

Perfect Fit Indus., Inc. v. Acme Quilting Co.,

(2d Cir. 1980) ("If there was intentional copying the second

comer will be presumed to have intended to create a confusing

similarity of appearance and will be presumed to have

succeeded.") -- since the defendant's intent standing alone

(without reference to the defendant's competence and the nature

of the defendant's actions) reveals little about the probable

outcome of the defendant's conduct.14

14 . Thus we must disagree with one commentary, which, relying on case law (but not attempting to defend or explain its assertion), states: "Once intent to benefit or capitalize under Section 43(a) is found, the presumption or inference of likelihood of confusion logically ensues." MCKENNEY & LONG, FEDERAL UNFAIR COMPETITION § 3.08[11][c] (emphasis supplied). Indeed, we note that this treatise contains a passage that, at least when generalized, illustrates the fallacy of the intent presumption: "the fact of likelihood of confusion [or lack thereof] among members of the relevant trade and purchasing public may be discerned by a court even if a defendant intended to realize a contrary result." Id. § 3.08[11][a]. The justification for these inferences in a trade mark or

product packaging case is that there is little or no competitive

need to copy another's distinctive symbol or presentation to sell

one's product, and that anyone who does so is most likely trying

to cash in on the competitor's good will attached to the

competitor's mark or packaging in order to sell his or her own

product. See, e.g., 2 MCCARTHY, TRADEMARKS AND UNFAIR COMPETITION

§ 23.33 ("[W]e can readily read into defendant's choice of a

confusingly similar mark the intent to get a free ride upon the

reputation of a well known mark."). This presumption largely

duplicates the weight given to the substantial-identity-of-

appearance factor (Scott factor 1) in the likelihood of confusion

inquiry, and the extra weight assigned to the intent to deceive

is somewhat punitive. Cf. 2 MCCARTHY, TRADEMARKS AND UNFAIR COMPETITION

§ 23.32 ("Where there is hard evidence of defendant's intention

to get a free ride on plaintiff's reputation, the court is free

to engage in the traditional rhetoric which accompanies punishing

the evildoer[.]").

Although these two types of inference from defendant's

intent do not directly serve the purpose of preventing consumer

confusion or misappropriation of a producer's good will -- either

of which might arise from good faith or bad faith actions -- the

inferences may serve as a deterrent to infringement. But where

product configurations are concerned, we believe there is little room for deterrence if appropriate labeling and marketing are

undertaken.

One primary purpose of the Lanham Act is to foster fair

competition. See, e.g., Merchant & Evans, Inc., 963 F.2d at 640

n.13 (citing Park 'N Fly, Inc. v. Dollar Park and Fly, Inc.,

,

(1985), and Jay Dratler, Jr.,

Trademark Protection for Industrial Designs, 1988 U. ILL. L. REV.

887, 926 n.10). Indeed, we have said that prevention of unfair

competition is the doctrinal basis for trade dress infringement

suits under the Act. American Greetings Corp., Inc., 807 F.2d at

1140-41 & n.2. Where product configurations are concerned, we

must be especially wary of undermining competition. Competitors

have broad rights to copy successful product designs when those

designs are not protected by (utility or design) patents. It is

not unfair competition for someone to trade off the goodwill of a

product, see Kellogg Co. v. National Biscuit Co.,

,

(1938); it is only unfair to deceive

consumers as to the origin of one's goods and thereby trade off

the good will of a prior producer. See also Duraco,

.

Unless very narrowly tailored, deterrents to copying of

product designs -- as opposed to product packaging or trademarks

-- would inhibit even fair competition, thus distorting the

Lanham Act's purpose. We believe that the best way to further

Congress's intent is to limit carefully the scope of any possible deterrence of competition. Cf. Merchant & Evans, Inc., 963 F.2d

at 640 ("[C]ourts should tailor trademark remedies to decrease

the likelihood of confusion without unnecessarily inhibiting

competition."). Recognizing that trade mark and trade dress

cases on one hand and patent cases on the other do not involve

identical considerations, we nevertheless turn for guidance in

this task to patent cases concerning defendants' intent, for, as

we have noted, we must decide product configuration cases so as harmonize with the federal patent laws. See supra at Error! Bookmark not defined.-36.

In patent infringement cases, a defendant's bad intent is

relevant in at least two contexts. First, under the doctrine of

inequitable conduct, infringement claims may be rendered

unenforceable if a plaintiff intended to deceive the Patent

Office by failing to disclose material evidence. See, e.g.,

Braun, Inc. v. Dynamics Corp. of America,

(Fed.

Cir. 1992); Allen Organ Co. v. Kimball Int'l, Inc.,

(Fed. Cir. 1988). Second, a plaintiff may receive

increased damages where a defendant willfully infringed its

patent. See, e.g., Braun, Inc.,

; E.I. du Pont de Nemours & Co. v. Phillips Petroleum Co.,

(Fed. Cir. 1988). In either case, however, the plaintiff must

prove by clear and convincing evidence that the defendant had the

relevant bad intent. See, e.g., Braun, Inc.,

(intent to deceive Patent Office and willful infringement); Allen Organ Co.,

(intent to deceive Patent Office);

E.I. du Pont de Nemours & Co.,

(willful

infringement). Although in the present context we are not

dealing with increased damages or actions taken by the Patent

Office, product configuration trade dress cases nonetheless

implicate patent-like restrictions on competition. Like the

doctrine of inequitable conduct, a heightened evidentiary

standard would serve to ensure that deviations from the "the

federal policy . . . of allowing free access to copy whatever the

federal patent and copyright laws leave in the public domain,"

Compco Corp.,

,

, are not casually

countenanced. And much as the burden of proof for willful

infringement assures that competitors are not penalized by

increased damage awards without compelling evidence, we think it

similarly important to competitors -- as well as the public --

that competition not be hobbled by monetary damages or injunctive

prohibitions absent similarly compelling evidence.

Accordingly, for all the foregoing reasons, we hold that in

the product configuration context, a defendant's intent weighs in

favor of a finding of likelihood of confusion only if intent to

confuse or deceive is demonstrated by clear and convincing

evidence, and only where the product's labeling and marketing are

also affirmatively misleading. Of course, a plaintiff might

succeed in proving likelihood of confusion without evidence of

affirmative deception. We only hold that, to be considered as evidence of a likelihood of confusion in a product configuration

case, the defendant's intent must meet the conditions we have set

forth.

6. Marketing Considerations (Scott Factors 7-10)

The remaining factors identified by Scott as bearing on the

likelihood of confusion address various aspects of the marketing

of the products. In the product configuration context, none of

these four factors tends to establish a probability of confusion,

rather than a mere possibility, and thus we conclude that they

should be treated as necessary but insufficient conditions for

showing a likelihood of confusion.

The seventh Scott factor is "whether the goods, though not

competing, are marketed through the same channels of trade and

advertised through the same media." We believe that this factor,

which is explicitly formulated for application to non-competing

products, serves primarily to establish the possibility of

confusion and carries little weight toward establishing the

probability of confusion; if not shown, it may exonerate a

defendant, but if established, it merely allows the plaintiff's

case to go forward. Moreover, it will rarely need to be

considered in a product configuration trade dress infringement

case, for the goods at issue will almost by definition be in

competition.

"The extent to which the targets of the parties' sale

efforts are the same" is the eighth Scott factor. Like the marketing channel inquiry, this factor was developed largely for

non-competing products, see, e.g., Interpace Corp. v. Lapp, Inc.,

(3d Cir. 1983); Scott Paper Co.,

, and relates more to the possibility than the probability

of confusion. Particularly in a product configuration case, this

factor should be considered necessary but not sufficient: If

different consumers buy the defendant's product and the

plaintiff's product, the defendant will typically win; if

substantially overlapping audiences buy the products, the

plaintiff does not automatically win, but will usually have the

opportunity to further develop its case for likelihood of

confusion.

"The relationship of the goods in the minds of the public

because of the similarity of function" and "other facts

suggesting that the consuming public might expect the prior owner

to manufacture a product in the defendant's market" are the ninth

and tenth Scott factors for determining likelihood of confusion.

Bearing in mind that these factors also were developed for non-

competing products, we believe that they are largely superfluous

in product configuration cases. The requisite similarity of

trade dress in the product designs themselves would in most cases presuppose a similarity of function between the products at

issue. Hence, some measure of so-called "competitive proximity"

will always be present in product configuration trade dress

infringement cases and therefore, while a necessary condition for there to be a likelihood of confusion, this factor is not a

sufficient condition, nor does it by itself create a strong

presumption that confusion is likely to ensue.

C. The Balance of the Modified Scott Factors Here

In this case, "[t]he dispositive issue is . . . consumer

confusion as to source. Regardless of how much secondary meaning

it possesses, a product's trade dress will not be protected from

an imitator that is sufficiently different in its features to

avoid such confusion." Freixenet, S.A. v. Admiral Wine & Liquor

Co.,

. For the reasons we explained above, we

believe that the district court committed legal error in

initially applying a "possibility of confusion" standard, and,

applying the (modified) Scott factors, we conclude that it

clearly erred in inferring from the evidence and testimony that

an appreciable number of buyers are likely to be confused as to

the origin of Bifold's Domino Junior valve. See CL 55, 62, 64.

1. The Governing Standard: Likelihood of Confusion

The district court held that [a] lower standard for "likelihood of confusion" is applied where a newcomer to an area already occupied by a long established entity is the alleged violator. The Third Circuit uses the phrase "possibility of confusion" to describe this standard.

CL 56 (citations omitted). As we explained above, see supra at 23-28, this standard is inapplicable in product configuration

cases. We decline, however, to reverse on this basis.

Although the district court announced the "possibility of

confusion" standard in its Conclusions of Law, it appears that the court might not have relied on the lowered threshold in

finding for the plaintiff. None of the other "Conclusions"

bearing on the issue of confusion included the "possibility"

language; those that mentioned any measure used "likelihood" of

confusion, the correct standard. Accordingly, in an excess of

caution, we treat Conclusion of Law 56 as surplusage, and review

the judgment for clear error with respect to the conclusion that

Bifold's actions present a likelihood of confusion, Ciba-Geigy

Corp.,

. We apply the Scott factors as modified,

see supra Section II.B.

2. Viability of the District Court's Similarity Fact Finding

The district court correctly identified the similarity of

product appearances (Scott factor 1) as the threshold inquiry in

ascertaining likelihood of confusion. However, it improperly

imported the trade mark/product packaging standard for the weight

to be assigned this factor, holding that "if the overall

impression created by the trade dress is essentially the same, it

is very probable that the products are confusingly similar."

From there, it apparently reasoned that because "[t]he overall

appearance of the Versa B-316 valve and the Bifold Domino Junior

valve is virtually identical[,] there is a likelihood of

confusion." See also CL 64 ("Bifold Domino Junior valves have a very similar appearance to Versa B-316 valves; there is a

likelihood of confusion."). Despite the appreciable differences between the valves'

appearances, see supra at 10-11, we do not hold the district

court's finding of similarity of appearance to be clearly

erroneous. But in a product configuration case, the similarity

of the product designs does not alone give rise to a strong

inference of likelihood of confusion, see supra at 30-32, since

the greatest weight must be given to the primary means by which

consumers identify the products' sources: packaging, trademarks,

and advertising. Accordingly, the similar appearance of the two

valves' designs allows Versa to argue -- but does not establish

-- a likelihood of confusion. The district court's findings

concerning the trade channels and advertising media used by

Bifold and Versa (Scott factor 7) and Bifold's targeting of the

same customer group (Scott factor 8) similarly do little to

establish likelihood of confusion. 3. Intent, Competitive Proximity, and Likelihood of Confusion

Compounding its error regarding the effect of the similarity

of the valves' appearances, the court asserted that "[a]n intent

to copy trade dress and/or finding of copying by a junior user is

often alone dispositive of a finding of likelihood of confusion."

Even as concerns trade marks and product packaging, however, only

an intent to deceive or confuse consumers can suffice to raise a

presumption of likelihood of confusion in this circuit. See

supra at 41. Moreover, in a product configuration case the

defendant's intent (Scott factor 5) is not relevant to the issue

of likelihood of confusion absent affirmatively misleading

labeling and marketing. Here, Bifold's identification of its

Domino Junior valves is by no means misleading, see supra at 11; infra at Error! Bookmark not defined.-65, and thus Bifold's

intent should not be considered.

Similarly, the district court erred in holding that "[w]hen

products are used in the same application, such a competitive

proximity of goods strongly favors a finding of likelihood of

confusion" (emphasis supplied). This proposition finds no

support in the two decisions of this court cited by the district

court, see Interpace Corp.,

; Scott Paper,

, and at all events it is not applicable where trade

dress consists in a product configuration, as our previous discussion explains. See supra at Error! Bookmark not defined.. 4. Strength of the Trade Dress and Likelihood of Confusion

Turning to the Scott factors that are relevant to the

likelihood of confusion in this product configuration case, we

first note that the "strength" of Versa's trade dress in its B-

316 valves' configuration (Scott factor 2) may not support a

conclusion of likelihood of confusion because there is no

evidence that consumers rely on the appearance of the B-316 valve

to identify it. See supra at 33-34. To the contrary, all the

evidence shows that consumers order valves by multi-digit part

and model numbers peculiar to the manufacturer. In selecting the

valves buyers do not specify the desired appearance but rather

designate functional specifications listed in schematic diagrams,

specification sheets, and manufacturers' catalogues. Such

precision in ordering is necessary, for Versa offers many

variations of its valves. Thus, the "strength" of the B-316's

trade dress does not bolster Versa's case for a likelihood of

confusion. 5. The Evidentiary Role of Actual Confusion

This brings us to evidence of actual confusion (Scott

factor 6) or the lack thereof (Scott factor 4). The district

court correctly noted that Versa need not prove actual confusion,

only a likelihood of confusion. Although the district court did

not address the pertinent evidence in its Conclusions of Law or

explicitly rely there on evidence of actual confusion, we will

address the Findings of Fact arguably relevant to actual

confusion that might support the district court's conclusion of

likelihood of confusion. Our examination confirms that the

district court's ultimate conclusion was clearly erroneous, not

supported by record evidence, let alone evidence cited anywhere

in the opinion. a. Carr's Involvement Reflects No Actual or Likely Confusion

The district court commenced the "Likelihood of Confusion"

section of its Findings of Fact by discussing Bifold's "sole

sales representative in the United States." The court found (and

there is record evidence to support) that Bifold hired James

Carr, III, a former Versa regional marketing manager; that Carr

has already tried to sell Bifold products to Gordon Fraleigh, a

Versa distributor who knew Carr for a number of years while Carr

was a regional sales manager for Versa; and that Carr told

Fraleigh that the Bifold valve was an "exact copy" of the Versa

B-316, as a result of which there was confusion in Fraleigh's

(heightened by Carr's former relationship with Versa) mind as to

the relationship between Versa and Bifold.

This depiction of the facts, however, is misleading. It

presents only a snapshot of Fraleigh's mental processes, taken

from a particular angle at a single instant in time. Examining

Fraleigh's uncontested testimony from a different angle reveals

the situation more fully: First, the telephone call in question

occurred sometime around the early part of 1993, but Fraleigh

knew that Carr left Versa's employ in 1990. Thus, at the time of

this call, Fraleigh knew Carr was not with Versa; indeed, during

the call, Carr told Fraleigh that he was with Bifold, an English

company, and he did not say that Bifold was connected with Versa

or that its valves were made by Versa. Second, Fraleigh's

employer, the Fraleigh Company, distributes the products of about seventy companies, including Versa, and before the call in

question Carr had phoned Fraleigh representing various non-Bifold

product lines competitive with Versa. Fraleigh was apparently

confused only because he had not previously seen duplicate

products in the fluid power industry and because Carr had once

been a Versa representative.

Moreover, a slightly broadened temporal focus exposes the

manifest error in the district court's fact finding. Initially,

we note that Fraleigh's testimony reveals that he did not even

know whether Carr was referring to Bifold's Domino Junior valve.

Nor did Fraleigh see the valve, for he and Carr conversed by

telephone. Fraleigh's testimony, then, cannot be evidence that

the appearance of the Domino Junior was so like Versa's trade

dress that it would confuse consumers as to the sources of the

valves. Furthermore, Fraleigh testified that, because of his

confusion, he called Versa Products to find out what was going

on. Versa's sales manager, Joe Sudol, explained that Bifold was

a competing company from England that had copied the B-316.

Indeed, he asked Fraleigh to try to get information on Bifold's

valve.

Plainly, then, Fraleigh's testimony does not represent an

instance of "actual confusion." It reflects only fleeting

uncertainty as to the relationship between Bifold and Versa, not

a mistaken belief that there was any affiliation between the two

companies. Fraleigh was able with minimal effort to procure the modicum of information he needed to dispel his uncertainty.15 We

believe that Fraleigh acted as a prudent distributor-customer of

these sorts of valves, and as a result was not confused in the

Lanham Act sense.16

15 . In the absence of evidence to the contrary, it is also most likely that Carr himself would have told Fraleigh the truth -- that Bifold is an unaffiliated competitor of Versa -- had Fraleigh asked. Courts may not simply presume that individuals will lie in direct violation of trademark and unfair competition laws. Indeed, Versa's counsel conceded that "I'm not and cannot offer to this Court that we have proof of a distributor that has done that [i.e., falsely indicated that Bifold is associated with Versa's products]." Nor did Versa even offer other instances in this industry where such misrepresentation had occurred. (Versa Vice-President and Chief Operating Officer Frank Vetter opined only that "it becomes very easy for a Bifold perhaps distributor [sic] to go in and, as you might hear later on in testimony, [say] that this valve is a direct interchange with a Versa valve, it fits in the same place, it performs the same function." This is a far cry from evidence that distributors mispresent the sources of the valves they sell. The district court therefore correctly characterized such testimony as "highly speculative," and Versa's expert witness Gerald Murphy as not qualified to "opine as to whether somebody's going to lie or not." Pharmaceutical cases relying on possible substitution of one maker's drug for another by pharmacists filling prescriptions are not to the contrary. In such cases, the finding of likelihood of confusion is supported by evidence that improper substitution commonly occurs in prescription filling, and that the minuscule markings on pills with similar trade dress are sufficiently difficult to read by many customers that the markings do not reduce the likelihood of confusion. See, e.g., SK&F, Co.,

& n.2, 1061. 16 . Thus, aside from its bearing on the channels of trade and target audiences, see supra at 48-49, evidence that Carr has still been able to get access to Versa valve products and has recently sold Versa valves to the same customers to whom he will be selling Bifold valves is irrelevant to likelihood of confusion. b. The Wentworth Fax Reflects No Actual Confusion

Second, the district court asserted that at least one

customer has forwarded to Bifold a telefax that was initially

addressed to Versa. The fax from Trevor Wentworth opened with

the following statement: " Derek reference our telecon this

morning here are the requirements for the above referenced

project." The original addressee was Versa, "Attention: Dave,"

and after those names were crossed out, the same fax was sent to

Bifold, "Attention: Derek Close"; the fax number -- "Auto" --

was unchanged. But this fax may have been a request for

competitive bids,17 including only Versa's part numbers because

Wentworth had spoken to Bifold's sales representative by

telephone and had not yet been sent any spec sheets; or (although

unlikely) it might reflect a customer so befuddled that he could

not remember to whom he had spoken that morning, and thus not a

customer exercising ordinary care. At all events, there is no

evidence that the customer had even seen the appearance of

Bifold's Domino Junior valve to be able to confuse it with

Versa's trade dress on its B-316 valve. For these reasons, and

because there was no testimony at trial concerning this

unexplained fax, the district court clearly erred when it used

this evidence to buttress its conclusion that there was confusion

-- actual or likely -- as to the sources of the valves or the

relationship (or lack thereof) between Versa and Bifold.18

17 . Bifold explains on appeal, and Versa does not contest, that the fax "was a request for a price quote, and the customer c. The Hearsay Evidence Constitutes No Evidence of Confusion

(..continued) was seeking competitive bids." Br. of Appellant, at 38. We do not, however, determine that this explanation is true; rather, we cite it only as a possibility. There was no explanation offered at trial, for the district court at the outset admitted (without discussion) all documentary evidence appearing on a list prepared by either party and not objected to. 18 . Since the fax referred to B-series and V-series valves and was sent initially to Versa, we believe that the competitive bid explanation is the only plausible one in the absence of evidence to the contrary. By contrast, a fax sent initially to Versa but asking for a quote on Domino Junior valves would suggest confusion. Third, the district court erred in relying on hearsay

evidence for the proposition that there was actual confusion.

The district court recorded as a finding of fact that "When Mr.

Frank Vetter was asked by Bifold's attorney for examples of

actual confusion between Bifold's Domino Junior valve and Versa's

B-316 valve, Mr. Vetter related that he had been advised of

confusion at trade shows." We agree that the record reflects

Vetter's response. But his answer is pure hearsay: Vetter's

testimony upon which the district court relied was that "I have

been advised by our sales manager in Europe that there was

confusion at trade shows, that people had indicated that the

valves resembled, were identical and they would lead to

confusion." Vetter could not even identify the people allegedly

confused, instead referring Bifold's attorney to "the brief."

Moreover, Vetter's response only proves that people thought the

valves' appearances were similar, not that they were actually

confused by the similar appearances. In this light, even if

Vetter's testimony were not hearsay, it still would not

demonstrate confusion as to the sources of the valves engendered

by the similarity in appearance of the valves.

The district court similarly erred in making a finding of

fact that "Hans Albert, Sales Manager for Versa, B.V.,

substantiated that he had discussions with people at the

Stavanger, Norway trade show regarding the issue of confusion,

including Mr. Ellingston of Hark & Ellingston, a major competitor in Norway[,] and Mr. Ungerskruge, an employee of a company named

Holter that manufacture[s] wellhead control panels." Again, this

testimony is hearsay, to which Bifold objected. Versa then

offered it solely to prove that Alberts had a conversation with

two identifiable people, and the district court ruled that

Albert's testimony must not concern the substance of the

conversation. Accordingly, this testimony has no bearing on the

issue of the likelihood of consumer confusion as to the sources

of the valves, and it was therefore error for the district court

to include it as the basis for a finding of fact. Even were the

substance of the testimony admissible, Vetter testified only that

he spoke with people "with regard to the issue of confusion."

Thus, the testimony is not probative of a likelihood of confusion

as to source as a result of the alleged trade dress infringement. d. Summary Concerning Actual Confusion

In sum, we believe that there was no evidence of actual

consumer confusion as to source upon which the district court

could have relied to find a likelihood of confusion. Moreover,

as the district court found, "[o]nly two Domino Junior valves

have been sold to date in the United States and those have been

sold to Versa's sales representative so that there has been

little, if any, opportunity to develop evidence of further

confusion in the United States." Accordingly, evidence of actual

confusion or lack thereof does not weigh in favor of or against a

finding of likelihood of confusion. We turn to the final

relevant Scott factor. 6. Labeling, Care Expected of Consumers, and Likelihood of Confusion

As noted above, the third Scott factor is "the price of the

goods and other factors indicative of the care and attention

expected of consumers when making a purchase." As we have

described, this factor is fundamental in product configuration cases, where the most important facts are the marketing and

labeling of the similarly configured products. As we now

explain, the district court clearly erred in not finding these

factors dispositive in this case.

The district court was technically correct in stating that

"[t]he fact that the source of the product is clearly designated

on the product does not establish that plaintiff has failed to

demonstrate a likelihood of confusion as such an element is simply one factor to be assessed when resolving the confusion

issue." However, it failed to appreciate the converse

proposition, that a court need not consider all these elements

when some are dispositive. See Freixenet, S.A.,

. Here, as the court properly observed, "[i]n selling a

competing valve, Bifold's duty is to take reasonable steps to

prevent deception." Under the circumstances, Bifold more than

adequately met its duty to take reasonable steps to prevent

deception. a. Bifold's Extensive Labeling Precludes Likelihood of Confusion

Although the configurations of Versa's B-316 and Bifold's

Domino Junior valves are quite similar in appearance, we deal

here with a product configuration case, and thus the labeling of

the products takes on a heightened importance. See supra at Error! Bookmark not defined.-32. The facts found by the district

court clearly show that Bifold took entirely reasonable and

adequate steps to prevent confusion.

The district court found that "[t]he name VERSA and the

place of origin, `N.J., U.S.A.,' are cast into the metal [of the

B-316 valve body] to identify Versa as the valve's source."

Moreover, "[e]very valve body that Versa sells bears a label

displaying the VERSA name, logo and part number." Similarly, the

court noted that "Bifold casts its name into the DOMINO JUNIOR

valve body, and bolts onto the body a metal label displaying the

BIFOLD name." But this brief recitation fails to convey the adequacy of

Bifold's efforts. "In the case of a relatively high-priced,

single-purchase article, . . . there is hardly likelihood of

confusion or palming off when the name of the manufacturer is

clearly displayed." Merchant & Evans, Inc., 963 F.2d at 636

(internal quotation marks omitted); see also Bose Corp.,

(same). Here, the metal label bolted onto the Domino

Junior valves does more than "display[] the BIFOLD name." The

name appears in a logo of sorts in a font markedly different from

that used in the Versa logo. The label also contains Bifold's

part number and a valve serial number, the place of origin

(Wigan, England), Bifold's telephone number, and its fax number.

Moreover, this is not a case where "[t]he items are relatively

inexpensive and consumers cannot be expected to examine the

labels carefully," Scott Paper Co.,

, and even a

quick glance at the permanently affixed label reveals that Bifold

is the source of the Domino Junior valve. Thus, Bifold's labeling

will suffice to dispel any confusion about the valve's source

that the configuration of the Domino Junior valve might otherwise

engender in purchasers who exercise ordinary care. b. The Manner in Which the Valves Are Sold Virtually Precludes Likelihood of Confusion

In addition to the clear labeling, the manner in which the

valves are marketed further nullifies any likelihood of

confusion. As the district court found: The Versa B-316 and Bifold DOMINO JUNIOR valves are not sold on a shelf or selected on sight. Buyers order the valves based on functional specifications as shown on schematic diagrams, manufacturer's catalogs or specification sheets and samples available at trade shows and sales presentations.

Moreover, purchasers cannot buy Versa B-316 or Bifold Domino

Junior valves by name only. B-316 valves can be purchased only

by specifying a multi-digit part number pursuant to Versa's

comprehensive part numbering system. Similarly, Bifold requires

the use of its own part numbering system, with the numbers

obtainable only by reference to a Bifold specification sheet.

Finally, as the district court also found, "[t]he purchasers and

users of Versa's B-316 valves are qualified, knowledgeable

personnel who understand how the valves are to be installed and

operated."

The appearance of these valves simply plays no role in the

ordering process, which instead requires the use of detailed

technical specifications and lengthy, manufactuer-specific part

numbers. Under these circumstances, we find it utterly

inconceivable that one of -- let alone an appreciable number of

-- the professional buyers of these valves will be confused, by

the appearance of the Domino Junior, as to the valves'

manufacturers or the relationship between them. c. Summary of the Labeling and Care Expected of Consumers

The foregoing evidence must be viewed as virtually

precluding any likelihood of confusion. These valves are not

bought by children or casual consumers, nor are they purchased

solely by name. There is no likelihood of confusion -- indeed, virtually no possibility that the appearance of the Bifold Domino

Junior valve body will mislead purchasers into thinking that they

are ordering a Domino Junior valve from Versa or a B-316 valve

from Bifold, and the enormous safety concerns surrounding the

applications where these valves are used increase the already

great care used by purchasers of these valves.19 Typically, they

are found in offshore oil drilling control applications,

hazardous and demanding environments where loss of human life,

major environmental damage (and consequent liability), and huge

property loss may be at stake if a valve does not function

properly in an emergency shutdown. Because of the dire

consequences of using an improper valve, engineers who design the

control panels would be expected to exercise a high degree of

caution in selecting valves, and thus would be highly unlikely to

mistake a Versa B-316 for a Bifold Domino Junior.

Therefore, in light of the importance of the valves, the

process by which they are purchased, the sophistication of the

consumers, and the clarity of Bifold's labeling, there is no

likelihood (or even a realistic possibility) of consumer

confusion as to the source of Versa's or Bifold's valves, and we

19 . Although Versa intended its witnesses' testimony to highlight the hazards of confusing a Versa valve with a Bifold valve -- which would be product confusion, not source confusion as required for a Lanham Act violation -- the testimony is nonetheless indicative of the care that ordinarily prudent valve consumers may be expected to use. conclude that the district court's contrary finding was clearly

erroneous. 7. Private Labeling Theories Do Not Support Likelihood of Confusion

We must still address one additional theory under which the

district court found a likelihood of confusion: the private

labeling theory. The district court concluded, ostensibly as a

finding of fact, that [g]iven the virtual identity in appearance of the Versa B- 316 cast valve and the Bifold DOMINO JUNIOR cast valve and the fact that Bifold has not previously sold products in the United States, anyone in the industry might reasonably assume that Versa had manufactured but privately labelled the Bifold DOMINO JUNIOR valve or that the DOMINO JUNIOR valve is otherwise associated with Versa.

FF 232. The court further concluded that [t]he 'second comer" Bifold DOMINO JUNIOR valve looks so similar to the established Versa B-316 valve that it looks like a private label manufactured by Versa. The two valves could be confused; consumers would think that there is some relationship between the two valves and two companies.

FF 233 (citations omitted). Although we believe that these

conclusions present mixed questions of fact and law, for the

district court focused upon what consumers might "reasonably"

assume, we need not invoke plenary review, for we are firmly

convinced that they represent clear error, and that the theory of

confusion in which they are grounded does not support a claim

under the Lanham Act or New Jersey law.

In FF 232, the district court concluded from coincidence of

similarity of appearance and recency of entry into a market that consumers might reasonably assume private labelling or some other

relationship between the Domino Junior and Versa valves. The

district court is correct that the Lanham Act protects against

confusion not only as to source but also as to connection between

manufacturers of similar products. See, e.g., Institute for

Scientific Info., Inc. v. Gordon & Breach, Science Publishers,

Inc.,

(3d Cir. 1991). But the court's

inference would potentially subject any new competitor with a

product whose appearance resembles that of an established product

to an injunction on this private labeling theory. We have simply

been presented with no evidence that "private labeling" occurs

today on a scale significant enough to justify such a sweeping

extension of the law of unfair competition.

Even a presumption of more limited scope would not support

the district court's inference. Where product configurations are

at issue, consumers are not generally likely to jump to the

"private labeling" conclusion; consider for example Oreo and

Hydrox brand sandwich cookies, which are strikingly similar in

appearance. Consumers would not have assumed upon later

emergence of one brand that the first producer had marketed a

slight variation of its cookie under a private label. Rather, as

in situations like the present one, consumers generally are more

likely to conclude, quite reasonably, that a competitor has

entered the market with a substantially identical product. Second, the record evidence does not support the district

court's conclusion. Versa's counsel's opening statement at trial

fairly summarized the content of Gerald Murphy's testimony, which

formed the sole evidentiary basis for the district court's

private labeling conclusion: Mr. Murphy [Versa's expert witness] will also tell that as a result of his experience, look-alike products are naturally associated by way of operating characteristics and reputation. Just because the valves look alike, the Bifold Domino Junior valve will command attention from sales representatives and others that it would not otherwise obtain. That it will get sales opportunities from people in this industry that otherwise would not be available to the Bifold Domino Junior product, except for the fact that the Bifold Domino Junior product looks exactly like the Versa B- 316 product and is then able to trade off the reputation of the Versa B-316 product.

What Versa and the district court have failed to come to grips

with is the precept that "[e]xploiting the `goodwill of the

article,' Kellogg Co.,

,

-- the

attractive features, of whatever nature, that the product holds

for consumers -- is robust competition; only deceiving consumers,

or exploiting the good will of another producer, is unfair competition." Duraco,

(one emphasis omitted).

Moreover, and most importantly, all of Murphy's non-speculative

testimony supported (as Versa said in its opening) a finding of

exploitation of the goodwill of, at most, the Versa B-316

product, not the Versa identification itself.

Murphy testified about past situations where misfortunes

involving valves of one producer led to sales difficulties for

other manufacturers of similar valves. He did not testify about incidents where one producer copied another's trade dress, but

rather about instances where negative perceptions associated with

a particular type of valve were transferred to valves of the same

type made by other manufacturers. Thus, his testimony showed the

possibility of the ill will of one valve's diminishing the good

will of a similar valve. But even had Murphy testified that the

valves he was discussing had confusingly similar trade dress --

which he did not -- that would not suffice to show that consumers

abandoned the type of valve that had manifested defects because

they thought all valves of that type came from related sources.

Rather, consumer may have abandoned the valves because they

assumed that all valves of a similar type shared "operating

characteristics."

It is true that in Badger Meter, Inc. v. Grinnell Corp.,

(7th Cir. 1994), the Court of Appeals for the Seventh

Circuit relied in part on a private labeling theory to uphold a

finding of likelihood of confusion in a trade dress infringement

suit by a water meter manufacturer against a competitor who

copied the appearance of one line of meters. There, however, the

defendant was known within the relevant market to have previously sold water meters of another manufacturer under its own label.

. Here, in contrast, there is no evidence that Bifold

is known in the American market as having a history of selling

other valve manufacturers' products under its own label. Thus

Versa may not rely on the inference that consumers familiar with an established defendant with a known history of private labeling

will assume that it is selling an established plaintiff's product

under a private label agreement.

Unable to avail itself of the Badger Meter inference, Versa

attempts to ensnare Bifold by arguing that because Bifold is not

yet known in the American market, valve purchasers may assume

that Versa has manufactured the Domino Junior but is selling it

under a private label. A rule sanctioning this inference would

tend to strangle competition by adopting what is in essence a

presumption that consumers will believe an established business

has a greater market share than it really does. The district

court's conclusion that "anyone in the industry might reasonably

assume that Versa had manufactured but privately labelled the

Bifold DOMINO JUNIOR valve or that the DOMINO JUNIOR valve is

otherwise associated with Versa," represents a dramatic extension

of the law of unfair competition, one which we cannot believe

that Congress intended or that New Jersey would adopt.

We doubt that a company truly concerned about the quality of

its valves and its putatively distinctive product configuration

would use private labeling. The use of private labeling

undermines a claim that a product's appearance denotes its

source, because consumers will be less likely to associate the

multifariously labeled product with a single source. See, e.g.,

Tone Bros., Inc. v. Sysco Corp., 23 U.SP.Q.2d 1184, 1190-91 (S.D.

Iowa 1992), and cases cited therein. And if Versa were to contend that all the purchasers know that in fact Versa

manufactures the valves identified by a private label, we are not

certain what the private labelling would accomplish. Moreover,

it would seem that any manufacturer employing private labeling

for its product necessarily exercises control over that practice,

and if it is the plaintiff's actions that cause the confusion,

the plaintiff will not be heard to complain. Cf. Weil Ceramics &

Glass, Inc. v. Dash,

(3d Cir. 1989) (Becker,

J., concurring) ("[The plaintiff] has in effect engineered the

possibility of a likelihood of confusion and therefore

infringement in this case. This is not the sort of injury

trademark infringement actions under the Lanham Act were intented

to remedy."). We decline to establish a rule that would allow a

plaintiff to expand its own rights by using private labeling to

assure a design monopoly even despite adequate labeling by

competitors.

We have explained elsewhere that "the primary concern

[behind the trademark act] was to protect consumers and trademark

holders from spurious imitations."

(Higginbotham, J.,

for the court). Where, as here, a second comer has taken steps

to conspicuously label its product (however similar to that of an

established manufacturer), the newcomer has hardly represented

its product to be that of its competitor, and so has not offered

a "spurious imitation." Thus, even if there were evidence that

Versa uses private labeling, we do not believe that it could form the basis for a finding of likelihood of confusion. As it is,

however, there is absolutely no evidence that Versa or any other

competitor of Bifold's in the offshore oil well industry uses

private labeling. Accordingly, the district court clearly erred

when it accepted Versa's argument that Bifold's labeling will not

prevent consumer confusion.20

IV. CONCLUSION

To have prevailed in its action for trade dress

infringement, Versa needed to show the existence of a likelihood

that an appreciable number of consumers of the relevant type of

valves would probably be confused as to the source of Bifold's

Domino Junior valve or its affiliation (or lack thereof) with

Versa. Upon reviewing the trial record, with due regard for the

labeling actually used by Bifold, we conclude that Versa failed

to meet its burden, and that the district court's finding that

Versa had shown a likelihood of confusion is clearly erroneous.

We therefore will reverse the order of the district court, and

vacate the permanent injunction and award of attorneys' fees

against Bifold. 20 . New Jersey's commmon law and statutory prohibitions of unfair competition (which address, inter alia, "passing off" one's goods as those of another manufacturer and unprivileged imitation) generally parallel the federal cause of action for unfair competition under section 43(a) of the Lanham Act. See SK&F, Co.,

(3d Cir. 1980). Thus, "private labeling" does no more work for Versa under its state law unfair competition claim (see supra at 2, 22 & n.10) than it does under federal law.