Breaking: Supreme Court To Decide Whether Willfulness Is Required To Disgorge Profits Under Lanham Act

Patterson Belknap Webb & Tyler LLP

Patterson Belknap Webb & Tyler LLPToday, in its final orders list of the Term, the Supreme Court granted cert in Romag Fasteners, Inc. v. Fossil Inc. (No. 18-1233), to resolve a deep circuit split regarding Lanham Act remedies.  The specific question in Romag is “[w]hether … willful [wrongdoing] is a prerequisite for an award of [the defendant’s] profits.”  (All agree that an award of the plaintiff’s actual damages, as opposed to disgorgement of the defendant’s profits, is available irrespective of the defendant’s mens rea—but actual damages are often difficult to prove.)  Romag presents this question in the context of a trademark infringement claim, but the outcome should also control in federal false advertising cases, which are likewise governed by the Lanham Act.

The question is undoubtedly important, and the correct answer is not obvious.  As Romag’s petition noted, six circuits (the First, Second, Eighth, Ninth, Tenth, and D.C.) hold that willfulness is a requirement for any award of profits under the Lanham Act.  This is because pre-Lanham Act unfair competition cases appeared to treat willfulness as determinative.  See, e.g., McLean v. Fleming, 96 U.S. 245, 257 (1877) (stating that awards of profits are “constantly refused … in case[s] of … want of fraudulent intent”).  And it is broadly agreed that the Lanham Act intended to “codify” such common-law rules regarding the award of remedies.  Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 861 n.2 (1982) (White, J., concurring).

The other six circuits (the Third, Fourth, Fifth, Sixth, Seventh, and Eleventh) treat the defendant’s intent as one factor—albeit an important one—in a holistic equitable balancing.  Their decisions emphasize that, in 1999, Congress amended the remedies section of the Lanham Act (15 U.S.C. § 1117(a)) to add the italicized language below, referring to the newly-created cause of action for trademark dilution:

When a violation of any right of the registrant of a [registered trademark], a violation under section 43(a) [false designation of origin / false advertising], or a willful violation under section 43(c) [dilution] shall have been established …, the plaintiff shall be entitled … subject to the principles of equity, to recover … [the] defendant’s profits….

The reasoning is that, by using the word “willful” only in connection with the newly-added reference to dilution claims, Congress implicitly intended to make willfulness unnecessary for an award of profits in other types of Lanham Act cases.  See, e.g., Banjo Buddies v. Renosky, 399 F.3d 168, 174 (3d Cir. 2005) (holding that this statutory amendment “superseded” the prior “bright-line willfulness requirement”).  But other courts have rejected this reading as ignoring the actual “backstory” of the 1999 amendment.  See, e.g., Stone Creek, Inc. v. Omnia Italian Design, Inc., 875 F.3d 426, 439-42 (9th Cir. 2017) (“[T]he 1999 amendment does not change the foundation of Ninth Circuit precedent—willfulness remains a prerequisite for awarding a defendant’s profits.”).

Romag should resolve this entrenched 6-6 circuit split and provide much-needed clarification in the area of Lanham Act remedies, where courts still puzzle over the meaning of pre-Lanham Act Supreme Court decisions from over a century ago.  Stay tuned.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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