Key Points:

  • In Romag Fasteners Inc. v. Fossil Inc. et al., the Supreme Court held that a showing of a defendant's willfulness is not a prerequisite for recovering an infringer's profits for trademark infringement under the Lanham Act.
  • The Supreme Court also made clear that a defendant's mental state-including willfulness-nevertheless remains highly important in a decision to award profit damages.

Last week, the Supreme Court held in Romag Fasteners Inc. v. Fossil Inc. et al. that a showing of willfulness is not required for a plaintiff to recover a defendant's profits resulting from trademark infringement under 15 U.S.C. §1125(a). This decision settles a split in the circuits with respect to the requirement of a showing of willfulness in awarding profit damages to a trademark plaintiff.

Facts:

Romag, a company that sells magnetic snap fasteners for use in leather goods, had entered into an agreement with Fossil, a company that designs and markets fashion accessories, allowing Fossil to use Romag's fasteners in its products. Romag later discovered that Fossil's Chinese manufacturers were using counterfeit Romag fasteners. Romag sued Fossil for trademark infringement under the Lanham Act. The jury agreed that Fossil infringed, but found that Fossil had not acted willfully. Therefore, despite holding Fossil liable for trademark infringement, the district court declined to award Romag Fossil's profits attributable to the infringement. The district court reasoned that Romag had not shown that Fossil had acted willfully, a requirement for recovering profits under Second Circuit precedent. Romag appealed to the Federal Circuit, which applied Second Circuit law and upheld the district court's holding regarding the requirement of willfulness in seeking profit damages. Romag appealed to the Supreme Court, which granted certiorari.

Ruling:

Prior to this case, some courts required a showing of willfulness for recovery of defendant's profits, while others viewed willfulness as merely a factor for consideration in awarding profits. Clearing up the confusion, the Supreme Court unanimously held that, under the plain text of the Lanham Act, a showing of willfulness is not required for a plaintiff to recover an infringer's profits as damages for trademark infringement under the Lanham Act.

Justice Gorsuch's majority decision pointed to the damages provision in the statute, 15 U.S.C. § 1117(a), which explicitly requires a showing of willfulness to recover damages only for trademark dilution. Because willfulness is not textually required for recovering damages for trademark infringement, the Court observed, it would be improper to read such a requirement into the statute, especially when willfulness is explicitly required in the statutory provision applicable to trademark dilution. The Court further noted that there is no support for a willfulness requirement for recovering profits for trademark infringement in the Lanham Act's structure and history.

Fossil argued that a requirement of willfulness is necessary to deter baseless trademark suits. Although the decision did not reject this policy argument, it reasoned that the Supreme Court's function was to apply the law as ordained by policymakers. Hence, the Supreme Court ultimately held that although "a trademark defendant's mental state is a highly important consideration in determining whether an award of profits is appropriate," a showing of the defendant's willfulness is not a prerequisite for recovering profit damages for trademark infringement.

Justice Alito filed a concurring opinion, which emphasized that prior cases, particularly pre-Lanham Act cases, showed that willfulness is a highly important consideration in awarding profits under §1117(a). Justice Sotomayor concurred only in the judgment.

Bottom Line:

It is now settled that when seeking to recover a defendant's profits resulting from trademark infringement, a plaintiff is not required to prove willfulness. But a defendant's mental state-including willfulness-may still factor into the awarding of profits. By rejecting willfulness as an "inflexible precondition" to recovery, while noting that state of mind remains a relevant consideration, the Supreme Court placed the decision to award profits within the district courts' ample discretion. Whether courts will find infringement that is not intentional but results from careless or reckless disregard of trademark rights as justification for disgorgement of profits remains to be seen. Infringement defendants, however, will no longer be able to dispose of the specter of a profits award by obtaining summary judgment on the issue of willfulness.

Article orignally published on 28 April 2020

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