Ives Laboratories, Inc. (Ives) (plaintiff) was a pharmaceutical company that held a patent for the drug cyclandelate. Ives sold cyclandelate under the registered trademark “Cyclospasmol” in a 200-mg dose in a blue capsule and a 400-mg dose in a capsule that was blue and red. After Ives’s patent for cyclandelate had expired, Inwood Laboratories and other generic drug manufacturers (the generic manufacturers) (defendants) began selling cyclandelate in capsules that mimicked the same dosage and color scheme as the Cyclospasmol capsules. These generic products were supplied in bulk to wholesalers and pharmacists in containers that accurately indicated their source of origin, but the generic capsules themselves did not identify any source of origin. Ives alleged that pharmacists were illegally dispensing generic capsules as Cyclospasmol capsules, and that the generic manufactures had induced this infringing activity by producing the generic capsules in the same color and dosage scheme as the Cyclospasmol capsules. Ives sued the generic manufacturers under vicarious liability for trademark infringement and unfair competition under the Lanham Act and state law. The district court held for the generic manufacturers, finding that they had not induced the alleged infringement. Upon appeal, the court of appeals held the generic manufacturers were liable for trademark infringement under the Lanham Act, ruling that the evidence was sufficient to support a finding of liability. The Supreme Court granted certiorari.