Arcona v. Farmacy Beauty: Trademarks

The Ninth Circuit holds trademark counterfeiting requires likelihood of confusion, with no presumption from identical EYE DEW marks on dissimilar products.

Trademark counterfeiting carries the Lanham Act’s heaviest artillery: treble damages, statutory damages of up to $2 million per mark, ex parte seizure orders, and attorneys’ fees. In Arcona, Inc. v. Farmacy Beauty, LLC, 976 F.3d 1074 (9th Cir. 2020), the Ninth Circuit confronted a plaintiff who argued that those remedies come without the burden that governs every other trademark claim: proof that consumers are likely to be confused. Writing for a unanimous panel, Judge Kenneth K. Lee held that the plain language of 15 U.S.C. § 1114 requires a likelihood of confusion for a counterfeiting claim, and that courts will not presume confusion from identical word marks when the products themselves are not identical.

The decision, filed October 1, 2020, affirmed summary judgment for Farmacy Beauty in a fight between two skincare companies over the name EYE DEW. It was the first time the Ninth Circuit expressly held that confusion is an element of a civil counterfeiting claim, closing off a theory that would have turned counterfeiting into strict liability for any overlapping registered mark.

At a glance

Case: Arcona, Inc. v. Farmacy Beauty, LLC, 976 F.3d 1074 (9th Cir. 2020), No. 19-55586
Decided: October 1, 2020, before Judges Kenneth K. Lee and Patrick J. Bumatay and District Judge Donald W. Molloy (sitting by designation); opinion by Judge Lee; summary judgment affirmed
Holding: A trademark counterfeiting claim under 15 U.S.C. § 1114 requires a showing of likelihood of confusion, and identical marks on non-identical products create no presumption of confusion.
Status: Final. Certiorari denied, 141 S. Ct. 2800 (2021). A follow-on appeal affirmed a $504,382.42 attorneys’ fee award against Arcona in May 2022.

Counterfeiting as the first degree of infringement

The modern counterfeiting regime dates to the Trademark Counterfeiting Act of 1984, which criminalized trafficking in counterfeit goods under 18 U.S.C. § 2320 and amended the Lanham Act to give civil plaintiffs remedies far beyond ordinary infringement. Under 15 U.S.C. § 1117(b), a court shall award treble profits or damages plus attorneys’ fees where the violation consists of intentionally using a counterfeit mark; § 1117(c) offers statutory damages instead, and § 1116(d) authorizes ex parte seizure of counterfeit goods. Section 1127 defines a counterfeit as “a spurious mark which is identical with, or substantially indistinguishable from, a registered mark.”

The cause of action itself, though, lives in § 1114(1)(a), which reaches any person who uses in commerce “any reproduction, counterfeit, copy, or colorable imitation of a registered mark” where “such use is likely to cause confusion, or to cause mistake, or to deceive.” A counterfeiting claim is, as the district court decision the panel quoted in Gibson Brands, Inc. v. John Hornby Skewes & Co. put it, the “hard core” or “first degree” of trademark infringement. Because the marks in true counterfeit cases are copies by design, confusion is rarely disputed, which is why appellate case law on the elements of counterfeiting was “understandably thin” before this case forced the question.

Two eye creams named EYE DEW

Arcona, a California skincare company, registered EYE DEW in standard characters in March 2015 for its eye cream, sold mainly at Nordstrom in the United States in a tall, cylindrical, silver bottle inside a slim cardboard box, both bearing the Arcona housemark. Farmacy Beauty, a New Jersey company, independently began developing its own eye cream in 2014 and named it EYE DEW after a copywriter reported the name looked available based on “an initial online search and uspto.gov trademark lookup.” Farmacy’s product came in a short, wide, white jar with a squarish outer box featuring the Farmacy housemark, pictures of the Echinacea GreenEnvy plant used in the formula, a picture of farmers, and a description of the company. Farmacy began selling it at Sephora in 2015.

After a 2016 cease-and-desist letter went nowhere (the record suggested Farmacy had never heard of Arcona), Arcona sued in the Central District of California in September 2017, asserting counterfeiting, trademark infringement, § 43(a) unfair competition, and California unfair competition claims. Then came the strategic gamble that defined the case: at Arcona’s own request, the district court dismissed everything but the counterfeiting claim with prejudice. The theory was that counterfeiting required no proof of likely confusion, so Arcona could skip the hardest element and proceed straight to the Lanham Act’s richest remedies. Judge Otis D. Wright II granted summary judgment for Farmacy, finding it “implausible that a consumer viewing [Farmacy’s] EYE DEW product would be tricked into believing that product is actually one of [Arcona’s] EYE DEW products.”

The plain language settles the confusion question

On de novo review, the Ninth Circuit started and ended with the statutory text. Section 1114(1)(a) lists “counterfeit” alongside “reproduction,” “copy,” and “colorable imitation” as species of prohibited use, and conditions liability for all of them on use that is “likely to cause confusion, or to cause mistake, or to deceive.” The plain language, Judge Lee wrote, “requires a likelihood of confusion for a counterfeit claim.”

Arcona’s counterargument leaned on the remedial provisions. Neither § 1116(d), the seizure provision, nor § 1117, the enhanced damages provision, mentions confusion. The panel turned that observation around: both provisions expressly cross-reference civil actions under § 1114(1)(a), the very section that contains the confusion requirement. The remedies presuppose a violation; they do not define one. Circuit precedent had long read § 1114 this way in the infringement context, citing Stone Creek, Inc. v. Omnia Italian Design, Inc., 875 F.3d 426 (9th Cir. 2017), and Westinghouse Electric Corp. v. General Circuit Breaker & Electric Supply, Inc., 106 F.3d 894 (9th Cir. 1997), and in Idaho Potato Commission v. G&T Terminal Packaging, Inc., 425 F.3d 708 (9th Cir. 2005), the court had already required a counterfeiting plaintiff invoking § 1117’s special monetary remedies to establish that the mark “was likely to confuse or deceive.”

Sister circuits agreed. The Fifth Circuit in Springboards to Education, Inc. v. Houston Independent School District, 912 F.3d 805 (5th Cir. 2019), stated flatly that “Likelihood of confusion is also an element of counterfeiting,” and the Second Circuit reached the same result in Kelly-Brown v. Winfrey, 717 F.3d 295 (2d Cir. 2013). The Ninth Circuit’s holding created no split; it confirmed a consensus.

Notably, the panel sidestepped a second definitional question. The district court had suggested that EYE DEW as used by Farmacy was not even a “counterfeit” under § 1127 because the product as a whole was not “identical with, or substantially indistinguishable from” Arcona’s. The panel declined to decide whether § 1127 permits courts to look beyond the mark itself at that threshold stage, because the confusion holding disposed of the appeal either way.

No presumption from identical marks on different products

Arcona’s fallback argument invoked dicta from Brookfield Communications, Inc. v. West Coast Entertainment Corp., 174 F.3d 1036, 1056 (9th Cir. 1999), that “in light of the virtual identity of marks, if they were used with identical products or services, likelihood of confusion would follow as a matter of course.” Because both parties stamped EYE DEW on eye cream, Arcona argued, confusion should be presumed. The panel refused. Brookfield’s dicta and Stone Creek’s observation that “identical marks paired with identical goods can be case-dispositive” apply to identical products, and these products were not identical: they shared two words and nothing else. A court, Judge Lee wrote, “should not myopically focus on only the alleged counterfeit marks to the exclusion of the entire product or even common sense.”

Comparing the products as a whole, the panel found no genuine dispute about confusion. The packaging differed in shape, color, design scheme, and text. Each product prominently displayed its housemark, and under AMF Inc. v. Sleekcraft Boats, 599 F.2d 341 (9th Cir. 1979), the “use of a housemark can reduce the likelihood of confusion.” Farmacy showed that other beauty companies also used the phrase EYE DEW, which undercut the mark’s strength, and there was no evidence Farmacy intentionally copied Arcona rather than choosing a descriptive name in good faith. The panel did leave a door ajar in a footnote: a mark might be so strong in the marketplace that use of an identical mark alone causes confusion. EYE DEW, it concluded, “is not so strong.”

The epilogue: certiorari denied and a half-million dollar fee award

Arcona petitioned the Supreme Court, arguing that counterfeiting plaintiffs need not prove likely confusion. The Court denied certiorari on June 21, 2021, 141 S. Ct. 2800 (2021). Farmacy then moved for attorneys’ fees under § 1117(a)‘s exceptional-case provision, and the district court awarded $504,382.42. In an unpublished May 11, 2022 memorandum, the same panel affirmed, applying the SunEarth totality-of-the-circumstances standard drawn from Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545 (2014): the court had “repeatedly held” before Arcona’s suit that the statute’s plain language requires a likelihood of confusion for a trademark infringement claim, so Arcona could not reasonably have relied on a presumption of confusion. The case that began as a bid for treble damages ended with the plaintiff paying the defendant’s lawyers. As of July 2026, Arcona remains the Ninth Circuit’s controlling statement of the elements of civil counterfeiting.

Open questions

What does § 1127’s “substantially indistinguishable” standard measure? The panel expressly declined to decide whether courts assessing whether a mark is a “counterfeit” may look beyond the mark to the whole product. District courts in the circuit still lack definitive guidance on that threshold definition.
How strong must a mark be to confuse standing alone? Footnote 4 contemplates marks so powerful that identical use alone creates confusion, but the opinion offers no test for identifying them.
How far does the product-as-a-whole comparison extend into true counterfeit cases? Sophisticated counterfeiters sometimes copy a mark but alter packaging or channels. Arcona gives defendants an argument that dissimilar trade dress defeats confusion even where the registered mark is copied exactly.
Does the analysis change for service marks or certification marks, where there is no physical product to compare? Idaho Potato suggests the confusion inquiry adapts, but the fit is untested after Arcona.

Implications for brands and businesses

Counterfeiting is not a shortcut around confusion. The Lanham Act’s enhanced remedies attach only to violations of § 1114(1)(a), which means every counterfeiting plaintiff must build the same confusion record an infringement plaintiff would, including strength, proximity, intent, and marketplace context.
Do not dismiss your backup claims. Arcona’s voluntary dismissal of its infringement and unfair competition claims with prejudice converted a plausible trademark dispute into an all-or-nothing wager. Pleading in the alternative costs little; abandoning alternatives can cost everything, including a fee award.
Housemarks and distinctive trade dress are cheap insurance. Farmacy won in large part because its jar, box, and prominent FARMACY branding looked nothing like Arcona’s product. Consistent, prominent house branding materially reduces both infringement and counterfeiting exposure when product names collide.
Aggressive theories can make a case “exceptional.” Pressing a statutory reading contrary to repeated circuit precedent, and failing to offer any confusion evidence as a fallback, supported a half-million dollar fee shift under § 1117(a). Litigation strategy in trademark cases now carries a real downside risk, not just a lost claim.

Frequently asked questions

Is trademark counterfeiting a strict liability claim when the marks are identical? No. Arcona holds that the plain language of 15 U.S.C. § 1114 makes likelihood of confusion an element of a counterfeiting claim, just as it is for ordinary infringement. Using an identical registered mark is not enough by itself; the plaintiff must still show that consumers are likely to be confused by the defendant’s product viewed as a whole.

Why did Arcona press only a counterfeiting claim instead of ordinary infringement? Counterfeiting unlocks the Lanham Act’s harshest remedies, including treble damages or statutory damages and attorneys’ fees under 15 U.S.C. § 1117. Arcona voluntarily dismissed its infringement and unfair competition claims with prejudice and staked the case on the theory that counterfeiting requires no confusion showing. When the Ninth Circuit rejected that theory, the strategy left Arcona with nothing and exposed it to a fee award.

When can identical marks alone establish likelihood of confusion? Under Brookfield’s dicta and Stone Creek, virtually identical marks paired with identical goods can make confusion follow as a matter of course, as with a fake Louis Vuitton bag copying the real article. The Arcona panel also noted that an exceptionally strong mark might cause confusion standing alone. Neither situation applied to EYE DEW, a mark other beauty companies also used, on products that looked nothing alike.