Supreme Court Makes It Easier for Plaintiffs to Obtain an Award for Trademark Profits
In a decision last week, Romag Fasteners, Inc. v. Fossil Group, Inc. et. al., the United States Supreme Court made it easier for plaintiffs to obtain an award for profits in trademark infringement cases, by holding that plaintiffs are not required to prove that the defendant had acted “willfully” as a precondition for an award of profits under the federal trademark law, known as the Lanham Act, 15 U. S. C. §1117(a).
Previously, about half of the federal appellate courts, including the courts governing New York and California, had held that a plaintiff must prove that the defendant acted “willfully” in order for a court to even consider awarding profits in a trademark infringement case. The other federal appellate courts had generally held that “willfulness” was not a precondition, but it could be considered as one of several factors in deciding whether to award profits or other type of remedy.
Possible Remedies Without An Award for Profits
Without an award for profits, a plaintiff’s possible remedies would be much more limited, generally to an injunction prohibiting the defendant from using the mark; actual damages or out-of-pocket costs directly resulting from the infringement such as corrective advertising; in counterfeit mark cases, statutory damages from $1,000 to $200,000; court costs, and attorney’s fees in “exceptional cases,” but no award for the estimated profits which the plaintiff could have made from the mark absent the defendant’s use of the mark.
In the case decided by the Supreme Court last week, the plaintiff, Romag, and the defendant, Fossil, had entered into an agreement allowing Fossil to use Romag’s leather handbag fasteners in Fossil’s handbags. The parties’ relationship soured when Romag learned that one of Fossil’s factories in China used counterfeit Romag fasteners bearing the Romag mark in Fossil’s handbags. According to Romag, Fossil was not taking serious steps to stop the counterfeiting of Romag’s products.
After the parties’ attempts to amicably resolve their differences failed, Romag filed suit in the District of Columbia and obtained a ruling determining that Fossil infringed its trademark by using knockoffs of the company’s trademarked magnetic fasteners. However, Romag was later refused a $6.8 million award of Fossil’s profits because it couldn’t prove that Fossil acted willfully. The Federal Circuit affirmed the District Court’s judgment which declined to award Fossil’s profits to Romag.
Supreme Court – Not Required to Prove “Willfulness”
However, in a unanimous opinion by Justice Gorsuch, the U.S. Supreme Court ruled that Romag was not required to prove “willfulness” as a precondition to an award of Fossil’s profits. Justice Gorsuch noted that several portions of the Lanham Act expressly include a requirement of intent, whereas section 1117(a) did not while permitting a plaintiff to recover, “(1) defendant’s profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action.” The Supreme Court found that the clear language of the statute cut against Fossil’s position.
As a further argument in support of its position, Fossil argued that an award of profits is “subject to the principles of equity,” and that courts of equity routinely conditioned an award of profits on willfulness. However, according to the Court, the term “principles of equity” generally describes broad rules that span multiple practice areas, rather than a narrow rule regarding an award of profits in trademark law.
The Supreme Court also reviewed precedent in which courts of equity determined that an award of profits did not hinge on a willfulness finding, further undermining Fossil’s argument. In the end, however, the Court strictly relied on the clear terms of section 1117, which simply did not require a finding of willfulness to obtain an infringer’s profits.
Supreme Court Leaves a Window Open for Consideration of “Willfulness”
While the Supreme Court rejected the absolute rule that a plaintiff cannot obtain profits without a finding that the defendant acted willfully, the Court left open a window for courts to continue to consider a defendant’s mental state as one factor in deciding whether to award profits. The majority opinion explained that a “trademark defendant’s mental state is a highly important consideration in determining whether an award of profits is appropriate,” and the concurring opinion stated succinctly that: “willfulness is a highly important consideration in awarding profits under 1117(a), but not an absolute precondition.”
Romag is a good decision for trademark holders, in that it clears the path to an award of profits without a more burdensome requirement of “willful” infringement. However, as the Court made clear, a court can still consider “willfulness” as one factor in deciding whether to award profits.