Justices Say Willfulness Not Needed For Trademark Profits
April 24, 2020
- Supreme Court clarifies that there is no willfulness requirement for awarding profits in trademark cases
- Defendant’s mental state is important in determining whether an award of profits is appropriate, as “principles of equity” are determinative
In Romag Fasteners, Inc. v. Fossil, Inc., Romag and Fossil had a longstanding agreement that allowed Fossil to use Romag’s fasteners in Fossil’s handbags. Romag later learned that Fossil was using counterfeit Romag fasteners and sued, claiming Fossil had infringed its trademark and falsely represented that its fasteners came from Romag. At the district court trial, the jury found that Fossil had acted “in callous disregard” of Romag’s trademark rights, but that Fossil had not “acted willfully.” The district court refused Romag’s request for an award of Fossil’s profits, based on controlling precedent in the Second Circuit that required a plaintiff seeking a profits award to show the defendant infringed willfully.
The Supreme Court noted that not all Circuits agreed with the Second Circuit rule and granted certiorari to resolve the split in the Circuits on this issue. The Court vacated the judgment and remanded the case for further proceedings in light of its decision.
The relevant section of the Lanham Act relating to remedies for trademark violations is 15 U.S.C. §1117(a) which states:
When a violation of any right of the registrant of a mark registered in the Patent and Trademark Office, a violation under section 1125(a) or (d) of this title, or a willful violation under section 1125(c) of this title, shall have been established . . . , the plaintiff shall be entitled, subject to the provisions of sections 1111 and 1114 of this title, and subject to the principles of equity, to recover (1) defendant’s profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action.
On appeal, Fossil argued that a finding of willfulness was a prerequisite to an award of defendant’s profits. Fossil pointed to the statutory language that made a profits award “subject to the principles of equity” and contended that, since equity courts had historically required a willfulness showing before awarding profits, then §1117(a) also had a willfulness requirement even for violations under §1125(a).
The Court interpreted the statute based on plain meaning, pointing out that, while the statute does make willfulness a precondition to a profits award for violations under §1125(c) for trademark dilution, the statute has no such precondition for violations under §1125(a) for false or misleading use of trademarks. In this case, Romag had proved a violation under §1125(a).
The Court rejected Fossil’s arguments on several grounds. First, the Court noted that Fossil’s view would require the Court “to assume that Congress intended to incorporate a willfulness requirement here obliquely while it prescribed mens rea conditions expressly elsewhere throughout the Lanham Act.” The Court said that is not an obvious construction of the statute.
Second, the Court reviewed the trademark case law prior to the Lanham Act with respect to treating willfulness as a prerequisite for a profits award and noted that there is no clear understanding in the case law for or against such a prerequisite. The Court concluded that all that can be said with certainty is that a defendant’s mental state is an important consideration in awarding profits in pre-Lanham Act cases.
The Court’s decision eliminates the ability of a trademark defendant to argue that a finding of willfulness is an absolute requirement to an award of profits. Principles of equity could call for an award of profits even if the defendant’s infringement is not willful. Therefore, a plaintiff seeking an award of profits should present all available evidence on the nature of the defendant’s acts to increase the chances that profits can be recovered.