After conducting a private undercover investigation, Levi Strauss and Company brought this action against Avner Shilon for: (1) offering to sell and producing counterfeit goods under section 32 of the Lanham Act, 15 U.S.C. § 1114; (2) unfair competition under section 43 of the Lanham Act, 15 U.S.C. § 1125; and (3) unfair competition and trademark dilution under California law. Cal. Bus. & Prof.Code §§ 14320, 14330 & 17200.
The district court granted partial summary judgment to Levi Strauss on the question of whether Shilon offered to sell counterfeit labels and jeans. After a bench trial, the district court rejected Shilon’s affirmative defenses, enjoined Shilon from further dealings in Levi Strauss products, and awarded Levi Strauss а portion of its attorney’s fees and investigation costs.
BACKGROUND
During an undercover investigation initiated by Levi Strauss & Company, Avner Shilon, a Los Angeles clothing manufacturer, offered to sell 10,000 sets of counterfeit Levi Strauss labels аnd tags and 10,000 pairs of “blank” counterfeit Levi’s jeans
Fernandez tried unsuccessfully to convince the police and customs officials to conduct a raid on Shilon’s business to seize the labels. Thus, without having the actual counterfeit goods in hand, Levi Strauss filed this lawsuit against Shilon for offering to sell and producing 10,000 sets of counterfeit Levi Strauss jeans and components.
DISCUSSION
A. Liability Under the Lanham Act
1. An Offer to Sell Counterfeit Goods
Shilon appeals the district court’s grant of summary judgment on the issue of liability for offering to sell counterfeit goods where no goods were actually sold or produced. Shilon argues that the Lanham Act does not create liability for a “naked offer” to sell goods.
A grant of summary judgment is reviewed de novo. Jesinger v. Nevada Fed. Credit Union,
Section 32 of the Lanham Aсt created a civil cause of action for trademark infringement and counterfeiting. Despite clear language to the contrary, Shilon argues that without the actual sale or production of counterfeit goods he cannot be held liable to Levi Strauss simply for making an offer tо sell such goods. Section 32 provides that:
(1) Any person who shall, without the consent of the registrant-
fa) use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake or to deceive; or
(b) reproduce, counterfeit, copy, or colorably imitate a registered mark and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in connection with the sale, offering for sale, distribution, or advertising of goods or services or in connection with which such use is likely to cause confusion, or to сause mistake or to deceive shall be liable in a civil action by the registrant....
15 U.S.C. § 1114 (1995) (emphasis added). The statute does not require that the defendant be in possession of counterfeit goods at the time of the offer or that the defendant make an actual sale. An offer to sell without more will suffice to establish liability.
Shilon argues that without the actual counterfeit goods Levi Strauss cannot establish that the use of such goods was likely to “cause confusion, or to cause mistake or to deceive.” Id. This argument is unavailing. Shilon did not offer to sell hypothetical Levi’s tags, labels, and jeans which may or may not have been close enough to the real product to cause consumer confusion. His offer was to sell 10,000 sets of tags, labels, and jeans exactly like the samples that he had provided to the Levi Strauss investigators. Shilon admitted to providing these samples and he does not claim that these samples, if sold, would not cause consumer confusion or were not likely to deceive or cause mistake. Certainly the counterfeit Levi’s tags, labels, and jeans were intended to “cause confusion, or to cause mistake or to deceive.” Accordingly, Shilon can be liable under section 32 for an offer to sell counterfeit goods despite the district court’s conclusion that there was insufficient evidence to prove, that he actually sold or produced the goods.
2. An Offer to Sell Counterfeit Goods is Not Protected by the First Amendment
Shilon argues that, because Levi’s claim is based upon a “naked offer,” the First Amendment prevents the court from finding him liable under the Lanham Act. The district court’s conclusions on constitutional questions are reviewed de novo. Jacobsen v. United States Postal Serv.,
Shilon’s contention that his offer to sell counterfeit Levi’s components is protected by the First Amendment is specious. For commercial speech to come within the protection of the First Amendment, it must concern lawful activity. Nordyke v. Santa Clara County,
[T]he First Amendment does not protect all proposals to engage in commercial transactions. An offer to pay a “hit mаn” one million dollars to murder my neighbor proposes a commercial transaction. Simi*1313 larly, an offer to pay a government official to provide unauthorized copies of classified documents also proposes a commercial transaction. But these propоsals to engage in commercial transactions are not accorded First Amendment protection because the underlying transaction is illegal.
Id. Because the transaction underlying Shilon’s offer, i.e. selling counterfeit goods, is unlawful, the offer itself is not afforded First Amendment protection.
3. “Unсlean Hands” as an Affirmative Defense in Cause of Action Under the Lanham Act Action
Shilon argues that, because the investigators committed misconduct during the investigation, Levi Strauss has “unclean hands” and should have been equitably es-topped from obtaining relief under the Lanham Act. Shilon claims that he was “entrapped” by Fernandez who conducted an unlawful “sting” operation. The district court denied Shilon equitable relief.
A district court’s decision to deny equitable relief is reviewed for an abuse of discretion. See Diaz v. San Jose Unified Sch. Dist.,
“Unclean hands is a defense to a Lanham Act infringement suit. To prevail ... [e]quity requires that those seeking its protection shall have acted fairly and without fraud or deceit as to the controversy in issue.” Fuddruckers, Inc. v. Doc’s B.R. Others, Inc.,
The district court heard three days of trial testimony primarily concerning what transpired during the investigation. Shilon and Fernandez each testified and was subjected to cross-examination by opposing counsel. During closing arguments, Shilon’s counsel urged the court to grant Shilon equitable relief because he had been “entrapped” by Levi Strauss’ investigator. At the close of trial the district court expressed some concern about Fernandez’s investigation tactics; however, the court ultimately rejeсted Shilon’s claim for equitable estoppel.
The district court’s decision to deny Shilon equitable relief is supported by ample evidence in the record. Assuming arguendo that “entrapment” may be an affirmative defense in a civil action under the Lanham Act, and assuming, also for purposes of analysis only, that Fernandez induced Shilon into offering to sell counterfeit Levi’s jeans, there was sufficient evidence presented at trial from which the district court could conclude that Shilon was predisposed to sell or produce counterfeit clothing.
Five factors may be considered to show predisposition: (1) the defendant’s character and reputation; (2) whether the [investigator] initially suggested the criminal activity; (3) whether the defendant engaged in the activity for profit; (4) whether the defendant showed any reluctance; and (5) the nature of the ... inducement. United States v. McClelland,72 F.3d 717 , 722 (9th Cir.1995), cert. denied, — U.S. -,116 S.Ct. 1448 ,134 L.Ed.2d 567 (1996). Although none of the faсtors is conclusive, the defendant’s reluctance is the most important.
See United States v. Thickstun,
Shilon presented no evidence of reluctance. He admitted offering to sell counterfeit Levi’s products and to providing samples of such products. Even during discovery, Levi Strauss found another pair of “blank” counterfeit Levi’s jeans at Shilon’s offices. Accordingly, the decision to deny equitable relief was not an abuse of discretion.
Shilon appeals the district court’s grant of attorney’s fees and investigation costs. “In counterfeiting cases, ‘unless the court finds extenuating circumstances,’ treble damages or profits and reasonable attorney’s fees are available.” Intel Corp. v. Terabyte Intern., Inc.,
The phrase “extenuating circumstances” is not defined in the Lanham Act. However, the exception is extremely narrow. Louis Vuitton S.A. v. Lee,
C. Injunctive Relief
The district court enjoined Shilon from using “any counterfeit, copy, or color-able imitations of the trademarks of Plaintiff Levi Strauss & Co. that is likely to cause confusion.” Shilon argues on appeal that the injunction was granted unnecessarily. 15 U.S.C. § 1116(a) vests the district court with the “power to grant injunctions, according to the principles of equity and upon such terms as the court may deem reasonable, to prevent the violation of any right” of the trademark owner. We review the district court’s decision to grant an injunction pursuant to 15 U.S.C. § 1116(a) for an abuse of discretion. Polo Fashions, Inc. v. Dick Bruhn, Inc.,
A trademark plaintiff is “entitled to effective relief; and any doubt in respect of the extent thereof must be resolved in [the plaintiffs] favor as the innocent producer and against the [defendant], which has shown by its conduct that it is not to be trusted.” William R. Warner & Co. v. Eli Lilly & Co.,
CONCLUSION
Shilon admitted to offering to sell counterfeit Levi’s jeans and components. Such an offer will suffice to create liability under the Lanham Act. The offer is not protected speech because it was an offer to commit an unlawful act. The district court did not abuse its discretion when it denied Shilon’s request for equitable relief, nor was it an abuse of discretion for the district court to grant attorney’s fees, investigation costs to Levi Strauss, and a permanent injunction against Shilon.
AFFIRMED.
Notes
. The court held that there was insufficient evidence to show that Shilon actually produced counterfeit jeans and components. Levi Strauss did not appeal this adverse ruling.
. "Blank” jeans are those without the various tags, labels, and rivets placed on a completed pair of jeans. The plan was for Shilon to produce the 10,000 sets of "blank” jeans and Fernandez to export the jeans and labels separately to Mexico where they would be assembled and distributed. This scheme is evidently a common technique designed to foil U.S. trademark enforcement efforts.
. Shilon points out that there are no published appellate decisions finding liability for an offer to sell where there were no actual goods. The fact that there have been few or no cases finding liability for a "naked offer” under the Lanham Act sheds little light on the legal question of whether the Act allows for liability under such circumstances. After all, there are similarly no published decisions finding that one cannot be held liable for a "naked offer.” The fact that there are no published opinions on point is more likely a reflection of the limited remedies formerly available under the Lanham Act to plaintiffs where no counterfeit goods were actually sold. At the time this case was filed, a plaintiff could only recover damages and the defendant's profits, in addition to fees and costs. 15 U.S.C. § 1117(a) & (b) (1995). Thus, in cases where there was only an offer to sell, plaintiffs’ recovery was minimal. Here, for example, Levi Strauss' actual recovery was only $26,162.41.
In 1996, however, Congress amended § 1117, Pub.L. 104-153, § 7, adding subsection (c) which allows plaintiffs to elect statutory damages. 15 U.S.C. § 1117(c) (Supp.1997). This change applies only prospectively however and thus statutory damages are not available to Levi Strauss in this case.