Supreme Court: Profit Disgorgement Available Remedy for Trademark Infringement, Willful or Not

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Overview


In a unanimous decision, the Supreme Court of the United States confirmed that a plaintiff in a trademark infringement suit is not required to show that a defendant willfully infringed the plaintiff’s trademark as a precondition to a profits award.

In Depth


Resolving a split among the circuits regarding whether proof of willfulness is necessary for an award of a trademark infringer’s profits, on April 23, 2020, the Supreme Court of the United States issued a unanimous decision in Romag Fasteners, Inc. v. Fossil, Inc., et al. confirming that the plain language of the Lanham Act has never required a showing of willful infringement in order to obtain a profits award in a suit for trademark infringement under §1125(a).

Background

Romag sells magnetic snap fasteners under its ROMAG registered trademark. Fossil sells handbags and leather fashion accessories that are made by authorized manufacturers and include ROMAG fasteners pursuant to an agreement between the parties. When Romag discovered that one of Fossil’s authorized manufacturers had used counterfeit ROMAG fasteners in its products, Romag sued Fossil for trademark infringement, false designation of origin and related state law claims. A jury found that Fossil was liable for infringement of Romag’s trademark rights, but rejected that Fossil had acted willfully in using the counterfeit fasteners. Relying on controlling Second Circuit precedent, finding a lack of willful infringement led the district court to refuse Romag’s requested remedies consisting of Fossil’s profits earned in connection with the counterfeit and infringing fasteners.

On appeal, the US Court of Appeals for the Federal Circuit (also applying Second Circuit law) held that profit disgorgement could only be awarded if associated with a more egregious activity—such as willful infringement. Here, because the jury found no willful infringement, disgorgement was denied. IP Update, Vol. 20, No. 9.

Not all circuits require that a plaintiff seeking a profits award prove that the defendant’s trademark violation was willful. The question, as presented in Romag’s certiorari petition, was as follows:

Whether, under section 35 of the Lanham Act, 15 USC § 1117(a), willful infringement is a prerequisite for an award of an infringer’s profits for a violation of section 43(a), id. § 1125(a).

The Supreme Court took up the Romag case to resolve the dispute over the Lanham Act’s requirement for a profits award and specifically whether § 35 of the Lanham Act requires a showing of willful infringement for a plaintiff to be awarded an infringer’s profit for a violation of § 43(a). IP Update, Vol. 22, No. 7.

“Language, Structure, and History” – The Court’s Statutory Interpretation

Focusing on the Lanham Act’s “language, structure, and history,” Justice Gorsuch reminded the parties that the Court’s limited role is to read and apply the law as set forth by policymakers. Specifically, Gorsuch warned of the temptation to read into statutes words that aren’t there. On this point, the Court compared and contrasted language in the Lanham Act that specifically calls for the showing of willfulness as a precondition to a profits award when a plaintiff is alleging dilution of a famous trademark under §1125(c), against the absence of any such willfulness requirement in connection with a trademark infringement claim under §1125(a).

Turning to the statutory structure more broadly, the Court pointed to the Lanham Act’s “considerable care with mens rea standards” and noted that the federal trademark law speaks “often and expressly” about mental states, intention and knowledge. With that in mind, the Court found the absence of any willfulness language in the statute relating to the recovery of profits under §1125(a) to be “all the more telling.”

Fossil lobbied for the interpretation of a willfulness requirement by honing in on statutory language subjecting an award of a defendant’s profits to the “principles of equity.” Once again, the Court pointed to the Lanham Act’s carefully articulated mens rea standards to be in conflict with the vague “equity” language. Moreover, the Court explained that it was far from clear whether trademark law historically required a showing of willfulness for a profits remedy.

Finally, the court acknowledged that it is highly important to consider a trademark defendant’s mental state or intention in determining whether an award of profits is appropriate. That consideration, however, does not require the “inflexible precondition” of willfulness for the recovery of profits.

Vacating the appeals court judgment and remanding, the Supreme Court confirmed that a plaintiff in a trademark infringement suit is not required to show that a defendant willfully infringed the plaintiff’s trademark as a precondition to a profits award.

Justice Alito, joined by Breyer and Kagan, issued a short concurrence clarifying that that willfulness is not an absolute precondition to awarding profits but remains a “highly important consideration” in doing so. Justice Sotomayor also authored a concurrence in response to the majority’s “agnostic” position about awarding profits for both willful and innocent infringement, and pointed to authority from the courts of equity indicating that profits were hardly, if ever, awarded for innocent infringement.